By Matthew Stasiw.
Trump Extends Social Distancing Guidelines to April 30th
President Trump announced Sunday that the peak in the death rate from the Coronavirus is likely to hit within the next two weeks. Thus, he extended social distancing guidelines across the country until April 30th to slow the exponential spread. This decision came in response to the staggering amount of confirmed cases in the United States, surpassing 135,000, which now ranks above Italy and Spain. This past week has seen tremendous political action which has shifted this volatile market. This past Friday, the United States House of Representatives approved the historic 2.2 trillion-dollar aid package to help cope with the economic downturn caused by the pandemic. Although this relief fund is of tremendous use to hard-hit industries, small businesses, and unemployed citizens, the consumer outlook on the market is taking a massive hit. In fact, March’s decline in consumer sentiment was the fourth largest in 50 years. A continual decline is expected in April unless households can receive funds for their financial hardships very quickly.
Negative Effect on SIMM
The big question is how will this affect SIMM? With consumer sentiment and the view on market status being very pessimistic, our whole portfolio will likely take April roughly unless the financial hit from the pandemic can be controlled quickly. Along with this, social distancing guidelines have been extended an additional month, and as the peak of confirmed cases is yet to come, the likelihood of consumers to leave the house or spend money on non-essentials is low. That being said, our holdings in Apple, Goldman Sachs, Home Depot, Pepsi, Ulta Beauty, and SPY could face the most treat. Consumer demand and sentiment during this next month is too low to see growth here short term.
Potential Winners
Although the month of April will surely be hard to judge, some key winners from our portfolio could be Walmart, Amazon, CVS, Abbot, and Dollar General. Although huge growth is unlikely to happen in this market, resiliency, and convenience to consumers is likely to prevail. Walmart, CVS, and Dollar General all offer essential access to consumer goods in this challenging time. Amazon, with more consumers heading online due to fear, is also likely to grow with it’s smart moves and convenience to customers. Abbot stock will be one of the highest winners this month as news of the five-minute test for COVID-19 comes out. Since Abbot can make these tests available to urgent care settings, its consumer demand will rise greatly.
Conclusion
Although it is hard to judge this volatile market and make predictions on how the SIMM portfolio will be affected, the recent news on the Coronavirus is a small indicator. Consumer sentiment and demand in certain areas will give rise and fall to some parts of our portfolio, and a close eye should be kept on all the companies mentioned above. As always, just a reminder to stay safe during this troubling time.
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