Dear Clients,

I am writing to provide you with another portfolio update in light of the ongoing COVID-19 pandemic and the sizeable impact it has had on global economic activity and capital markets.  Although this is not the first pandemic the world has experienced, the scale of containment measures enacted has been unprecedented as has been the speed of the ensuing slowdown in global economic activity.  The sharp declines in equity markets over the past month and a half have been the fastest on record as markets have adjusted quickly and dramatically to mirror the sudden shock to the economic system.

From a macroeconomic perspective, we note that central banks around the world, notably the US Federal Reserve, are acting decisively and aggressively to support the financial system and provide liquidity for businesses.  Commercial banks, in turn, are working with customers to allow for deferrals on loan and mortgage payments to prevent an outsized escalation in defaults and stave off a protracted credit crisis.  In the midst of sharply higher unemployment, it helps that unemployment insurance and other forms of financial relief provide funds for individuals facing job loss. In the meantime, the government of the US, still the world economic leader, is working hard to devise a plan for Americans to return to work and for businesses to reopen.  The US government is wise to contemplate the trade-offs between COVID-19 containment efforts and economic sustainability as prolonged physical isolation and financial duress can result in unintended forms of societal harm.  With the restart of economic activity, much can change in a matter of time. 

In the midst of the current economic turmoil, we stand by our strategy of owning the best positioned companies in industries that are buoyed by long term secular growth.  However, in light of the changing economic landscape and differentials in the price movements of stocks we own and follow, we have worked hard to identify opportunities and risks that are not adequately factored into prices, and made adjustments to your portfolios accordingly. 

While there is much to worry about these days, it is important to note that markets are forward looking and bear markets typically form a bottom well before the storm clouds clear.  This is because there is a heavy psychological component in investing and markets often over-compensate for both good news and bad.  Though it is challenging to predict near-term price movements, we remain very confident in the longer term return potential of your portfolios.

In closing, we would like to wish you and your families the very best in health and safety especially during this time.  If you have any questions or would like to discuss anything with us, please do not hesitate to let us know.

Warm regards,

Woon Ai, with Cindy and Bonnie