Weekly Investment Strategy

Key Takeaways

  • ‘Keep Your Seatbelt Fastened’ for near-term volatility
  • Congress needs to ‘safely land’ a stimulus package
  • Sector positioning not a ‘one way ticket’ based on winner

This upcoming Wednesday is National Aviation Day, a holiday established by President Franklin Delano Roosevelt in order to honor the birthday of Orville Wright—inventor of the first airplane. While it’s hard to believe we’ve had the ability to fly for more than 115 years, it is even harder to comprehend the havoc that the COVID-19 pandemic has wreaked on the airline industry. At first, stay-at-home mandates prohibited any travel not deemed necessary, and now, the psychological impact has deterred Americans from entering airports despite increased sanitization methods and drastically reduced fares. In fact, our most recent Investment Strategy Sentiment Survey revealed that only 20% of respondents would feel comfortable boarding a plane by year end. Even though most of us will not be preparing for take-off anytime soon, there are many ‘connections’ between the flight process and the current state of the economy and financial markets.

  • Bottom Line: The Importance Of A Flight Plan | Before an aircraft departs, a pilot must have a flight plan in hand. While the plan rightfully contains some rather basic information, such as the destination and the number of passengers on board, it also contains some critical information should a problem, such as an equipment malfunction or adverse weather conditions, occur. We believe this overall level of preparedness should be mirrored by investors, especially now as the S&P 500 has ‘ascended’ to just below its all-time high. While we wish investors could just ‘sit back, relax, and enjoy the rest of the flight,’ a number of viable risks are still on the horizon for the near term. So instead, we urge investors to ‘keep their seatbelts fastened’ and rely on their financial advisor as a co-pilot in discussing not only the basics (e.g., investment goals, risk tolerance) but the critical asset allocation details in order to prevent emotionally-driven poorly timed decisions that could lead to sub-optimal performance.
  • Second Wave Of Covid-19 Could Cause Crosswinds | The US has made apparent progress on the COVID-19 outbreak, with the total identified cases, the testing positivity rate, hospitalizations, and the rate of increase in deaths all now hopefully making their ‘final descent.’ While we wish the efficacy and ‘estimated time of arrival’ of the potential vaccine were known, the US economy has been able to regain some of the momentum lost as ‘hot spots’ emerged throughout the nation. This has been evidenced by the improvement in a few of our real-time economic activity metrics, such as TSA screenings. This week, the TSA exceeded a daily screening count of 800,000 for the first time since March. While this is still well below the daily average seen during this time last year (~2.5 million), it is still more than 9x the lowest levels seen in April and a positive sign that the economy is proceeding on the right route. But in the months ahead, the threat of a second wave of COVID-19 may become more daunting. Upcoming large gatherings (e.g., schools, in-person voting) combined with colder temperatures could cause some ‘crosswinds’ for the recovery progress made thus far, and social distancing practices will be even more critical to mitigating the virus’ spread.