It’s wild world. There are so many issues confronting investors these days it’s difficult to prioritize a single important one. The matter/antimatter relationship between stimulus and COVID-19, the upcoming election, geopolitics, employment, contracting globalization, and others all fight for

headlines. Rather than picking one topic to highlight this month, we thought it more appropriate to briefly share our thoughts on several.

Uncertainty

Uncertainty is a hackneyed theme today, but few investors appreciate the past several years has been an unprecedented period of uncertainty. Those high levels of anxiety have likely contributed to companies’ preference for risk- averse capital allocation strategies such as dividends and share repurchase to riskier strategies like expansion of plant and equipment.

Gold has historically been a viable hedge against uncertainty, and it has indeed been among the best performing asset classes. Over the past 3 years, gold has actually outperformed other traditional safe haven assets like Treasuries and utilities stocks (Chart 1).

CHART 1:
Gold vs. US Treasuries and S&P 500® Utilities Sector
(6/30/17 – 6/30/20)


Source: Bloomberg Finance L.P.

Matter vs Antimatter: Stimulus vs. COVID-19

When antimatter touches matter, the universe is destroyed. If COVID-19 offsets historic stimulus, one should make sure their portfolio doesn’t get “destroyed.”

We remain concerned about the push and pull between the positives of historical fiscal and monetary stimulus and the negative of spreading COVID-19. We mentioned in January (before most investors had even heard of coronavirus) the spread of the virus would become a political issue and how important it would be for investors to take their cues from scientists and not politicians. COVID-19 has unfortunately become a main political issue, and investors seem to be ignoring some of the risks the virus still presents.