The second quarter of 2020 started with a bang. The Federal Reserve’s moves to support the markets during the quarter enabled the Dow to climb over 17%, the S&P over 20% and the Nasdaq to record all-time highs climbing over 30%. While the 10 and 30-year US treasury yields
barely budged, LQD the Investment Grade ETF climbed over 8% as the Federal Reserve purchased investment grade bonds. Mortgage interest rates continued to decline with 30-year interest rates currently in the 2.75% range down some 50 basis points during the quarter.

Funding for the Congressional emergency funding bills flowed to the public as many companies took advantage of the various emergency funding programs from both Congress and the US Federal Reserve. The US unemployment rate rose at an unprecedented weekly unemployment
claims skyrocketed. While slow to roll out, the extraordinary increase in unemployment benefits ($600 extra dollars per week allowed many to realize a $15 ‘minimum’ wage) appeared helpful. In the Northeast we saw diminished supplies of various commodities with toilet paper becoming
‘fair game’ for humor. As Covid ’19 raged in the Northeast early in the quarter, it wasn’t until the end of the quarter that the virus moved westward with reckless abandon.

Political theater continues unabated although the media is still more focused on Covid ’19 than the forthcoming election. For now the big question is who will Mr. Biden choose as a running mate? Secondarily Mr. Biden has explicitly stated that it his intent to roll-back the Trump tax
incentives. We expect to see the country teeter to the left as the electioneering season heats up. This means we will hear more about ‘Medicare for all’, Modern Monetary Theory (print money and then spend it) as well as a myriad of other topics.

Our search for undervalued assets requires patience as our search never ends. As the Covid-19 epidemic takes its toll on humanity, we can expect continued dislocation in global markets. Global company earnings and global fixed income markets will continue to be negatively impacted for the balance of 2020 and possibly into 2021. The ‘new normal’ is here, just trying to establish itself. Until next quarter, stay healthy.