We, at Atlas, sincerely hope this finds you well and dealing with this situation as comfortably as possible. We know that this can be especially stressful for people in cities, apartments and group living facilities. This period of isolation isn’t easy, but with vigilance, we are confident that this ultimately will lead to a positive change in the direction of this pandemic. For myself, here in the hills of western Massachusetts, the separation from friends, family and colleagues is difficult, but the anticipation of the beautiful Berkshire summer brings hope and faith that this shall pass. I’m reminded that what seems so important to our day-to-day lives is often truly less meaningful than what we often take for granted.

By this time, most Americans know someone who has come down with the illness and, regrettably, may know someone who has passed away. Some of us know healthcare workers who are on the front lines, working each day to help save others. My own wife is a one of them, as are some spouses of other Atlas associates. Our healthcare system is strained caring for those that have been stricken, and government agencies are taking extreme measures to prevent the economy from collapsing. While acknowledging the challenges, I think it’s important for all of us to keep working to contribute whatever we can. Our investment team is consistently looking ahead and recognizing ways to guide the portfolios we manage for our clients to the time when the coronavirus will be behind us.

Make no mistake; that moment is on the horizon, and this virus will pass. In time, therapeutics and vaccines will be advanced to suppress the pandemic, and those lucky or careful enough to avoid the virus will continue with their lives. No doubt, this will result in massive displacements. In this sense, I view this predicament with less anxiety than I did the financial crisis of 2007-2008. Today, I feel that the horizon is within sight. We may not know exactly what the terrain holds on the way there, but we know it’s out there. For those fortunate enough to hold assets and the prospect of preserving financial independence, there will be opportunities. What is important is to be positioned to make the most of those opportunities, for the future of our families, our communities and ourselves.

SOMETIMES IT’S NOT ENOUGH TO KNOW WHAT THINGS MEAN. SOMETIMES YOU NEED TO KNOW WHAT THINGS DON’T MEAN.

Recent events indicate that the time between now and mid-April is going to be challenging. In the coming weeks, we anticipate the number of confirmed cases of COVID-19 will climb sharply, as new tests are administered and previously unverified cases are confirmed. It was reported early this week that Abbott Labs has received the okay to release its testing kit that can provide a positive diagnosis in as little as five minutes. Abbott is looking to eventually produce up to 50,000 kits per day, and begin delivering some of them this week – clearly wonderful news.

Two days ago, President Trump released dire projections for the virus’s impact. We are now being told that deaths of anywhere from 100,000 to 240,000 can be expected in the next two weeks – a sobering projection. Beyond that, we’re told that the rate of mortality should decrease.

But viewing this in terms of overall market strategy, I’m taking heed of the possible impacts.

Till now, the healthcare system has been suffering a shortage of COVID-19 diagnostic kits. As a result, virus tests have been administered only to patients that have reached a threshold of symptoms that warranted the disbursement of a kit or were part of a high-risk group.  So, there are a few things to keep in mind about the statistics derived from that group: 1.) the number of actual cases as of today is being underreported, 2.) we can expect the curve to steepen in the near term as new tests are administered, and 3.) as a result of that skewed group, the potential rate of mortality and morbidity may be vastly overstated in relation to what it actually is in the general population.

Just a week ago the White House was floating the idea of “re-opening the economy” by Easter. Other politicians have been arguing that “the cure is worse than the disease”, referring to the negative impact on the economy from the stay at home policies. But, as was pointed out by Dr. Anthony Fauci, the nation’s top infectious disease expert, the virus doesn’t care about political timelines.

YOU SHOULD ALWAYS TAKE THE BEST FROM THE PAST, LEAVE THE WORST BACK THERE AND GO FORWARD INTO THE FUTURE.

One of the most striking factors about the financial crisis and COVID-19 is the similar timelines, with the virus showing up in 2020 at roughly the same point on the calendar that unemployment began to spike toward 10% in 2008. Financial markets hit their highest pessimism levels in mid-March, on nearly the same calendar day that Bear Stearns collapsed 12 years ago. The difference is the response times. Policymakers are responding quicker and with more force now as compared to 2008.

I think it’s important to make the point that the 2007-2008 financial crisis may just have produced the conditions for the financial system to now withstand this storm. In fact, the financial system, and specifically banks, are in a considerably better condition now because of the regulatory reforms put in place after the financial crisis. Thankfully, the banking system is not in imminent danger this time around, despite the fact that lines at the drive-thru are long. In my area, walk-in bank locations are closed as a precautionary measure to help protect their employees and flatten the curve of new COVID-19 cases. I don’t see any problem developing in the banking industry that should cause retail account holders concern.

The fiscal policy response to the coronavirus is faster and larger than the response was to the financial crisis. As part of the $2 trillion fiscal stimulus package, tax cuts amounting to roughly $700 billion over the coming six months is the most front-loaded stimulus in history. Rebate checks to individuals represent about $250 billion, leaving $450 billion that can be provided almost immediately for businesses, helping to support them. This is remarkable because normally fiscal policy lags the economic cycle. Congress has not been known to create and pass policy concurrent with the economic data, and of course, the process needed for passage of a bill usually takes time. So, historically when the process has been completed, the provisions of fiscal policy are sometimes insufficient to address the developing economic challenge. In addition, the implementation of fiscal policy changes usually takes months to achieve. While this package may take months to fully implement as well, its massive size and how front-loaded the tax cuts are is extraordinary and encouraging.

SOME PEOPLE FEEL THE RAIN. OTHERS JUST GET WET.

As you’re probably aware, the Treasury will be issuing checks directly to individual taxpayers. The following is taken from the IRS website https://www.irs.gov/newsroom/economic-impact-payments-what-you-need-to-know. “Tax filers with adjusted gross income up to $75,000 for individuals and up to $150,000 for married couples filing joint returns will receive the full payment. For filers with income above those amounts, the payment amount is reduced by $5 for each $100 above the $75,000/$150,000 thresholds. Single filers with income exceeding $99,000 and $198,000 for joint filers with no children are not eligible. Eligible taxpayers who filed tax returns for either 2019 or 2018 will automatically receive an economic impact payment of up to $1,200 for individuals or $2,400 for married couples. Parents also receive $500 for each qualifying child.”

The Treasury is trying to determine how to get the payments out as quickly as possible. Fortunately, the IRS sends out refunds via direct deposit on well over half the returns it handles each year. But what if the IRS doesn’t have any record of your bank account? “We will create a web-based system for people where we don’t have their direct deposit, they can upload it, so that they can get the money immediately as opposed to checks in the mail,” Mnuchin said on CBS’ “Face the Nation.” (Politico, 3/30/2020.) For those that are uncomfortable providing their account information, they’ll just need to wait.

The most powerful lever President Trump has to stimulate the economy would be a suspension of tariffs. A three-month suspension is a good start and would add another $17bn tax cut on top of the economic stimulus. 

Wall Street Journal, 3/27/2020 – U.S. Plans to Stop Collecting Import Tariffs for Three Months – Officials Say the Trump administration is preparing to suspend the collection of import tariffs for three months to give U.S. companies financial relief amid the coronavirus pandemic, according to administration officials. “Customs duties will be suspended for three months,” a senior administration official said Friday. Companies would still be liable for the tariffs at a later date, which hasn’t been determined, another official said. There would be no formal changes to tariff policy, officials said. Asked about The Wall Street Journal’s report at a news briefing late Friday, Mr. Trump called the report “fake news.”

The COVID-19 crisis is unlikely to be solved immediately, however the actions that are being employed by the government are unprecedented in their size and urgency. Only time will tell if these actions are sufficient, or if further fiscal actions are necessary. More to come.

THE WAY WE LOOK AT THE WORLD IS THE WAY WE REALLY ARE.

As a final note, this situation could lead to a restored sense of community in this country. In times of crisis, Americans have consistently risen to the occasion to do what is needed to overcome. As an investor, I’ve never bet against that record, and wouldn’t bet against it this time either.

Please feel free to contact your Atlas Wealth Management Advisor if you have any questions about this or any other financial matter. As always, we are always available to serve you.

John C. Ogle

Chief Investment Officer

P.S. – Acknowledgement to the artist formerly known as Robert A. Zimmerman for the quotes in bold caps above.