Artisan Canvas

In my nearly 30-year investing career, I have been through a number of stock market routs. This one ranks up there as one of the worst—if not for its depth (which remains as yet undetermined), then certainly for its intensity. The market has sold off faster than ever in history, and I have never seen more days of double-digits or nearly double-digits declines in such a short time period. This makes sense, as it’s probably the fastest drop-off in economic activity we’ve ever seen—one day, everyone’s at work; the next, everyone’s at home and all the restaurants are closed. The panic and fear are extreme, with emotion filling the void where information and analysis normally exist. Yet in every instance during my career, periods of fear and panic have presented incredible bargains; I believe this one is no different. I have learned that when it feels really bad, it’s usually the best time to allocate capital. It is painful and ugly right now, but our goal is buying the long-term survivors and compounders to position the portfolio for strong multi-year gains later. 

Escalating concern around the containment of COVID-19 and its impact on global economic growth has sparked an aggressive turn in risk sentiment over the last few weeks. The selloff in noninvestment grade markets has been unprecedented in terms of speed and severity. The repricing of risk has resulted in high yield spreads moving from under 400bps to more than 900bps in just 4 weeks (Exhibit 1). For context, it took 11 months during the 2008 recession for spreads to cross the same threshold, and more than 28 months during the 2000 downturn.

Escalating COVID-19 concerns and Saudi Arabia’s decision to cut oil prices and boost production have prompted a sharp selloff in global equity markets over the past month. We are monitoring both situations closely and believe the biggest relative performance risk from here is massive volatility. While there will likely be large up days for battered sectors, we expect a drift lower on balance until the true extent of the COVID-19 impact can be discounted into stock prices. 

At Artisan Partners, we take tremendous care to safeguard our goal of generating successful outcomes for our clients; our associates’ and clients’ well-being is our highest priority. We have a thoughtful and robust Business Continuity Management Program to ensure the safety and security of our associates and the continuation of business operations with as little interruption to our ability to serve clients as reasonable.

Given the fluidity of the COVID-19 situation, our Business Continuity Planning and Pandemic Preparedness committees have been regularly meeting jointly to ensure we are well-positioned to quickly adjust and react as circumstances warrant. This working group’s focus is evaluating the outbreak’s status, monitoring local and global governmental websites, adjusting the firm’s COVID-19 guidelines accordingly and bolstering our ongoing business continuity plan as needed. 

Just when it seemed Brexit was behind us and sailing might be smoother, there have been a handful of recent political shake-ups in and around Europe.

With stereotypical German efficiency, Chancellor Angela Merkel lined up her presumptive heir, Annegret Kramp-Karrenbauer, two years ago. But Merkel’s plan fell apart on 10 February when Kramp-Karrenbauer relinquished her post a as head of the center-right Christian Democratic Union (CDU) party and said she would not run for Chancellor in the 2021 national election.

At 11pm GMT on January 31, 2020, the UK officially Brexited. While Prime Minister Boris Johnson and fellow Brexiteers jubilantly celebrated the UK’s departure from the EU, both sides will soon sit back down to discuss what comes next.

Perhaps the adage, “Time is money,” is no truer anywhere than in equity markets. Some new research into high frequency trading (HFT) by the UK’s financial regulator, the Financial Conduct Authority, has quantified how much money may be tied to miniscule amounts of time—its answer: $4.8 billion, which represents the estimated revenue traders make from capitalizing on “slightly out-of-date prices.” Flash Boys kind of stuff.

As the last two impeachments (and possibly the one prior, too) have shown, impeachment has basically become a political way to say you don’t like the other guy. Whether that should be the case, whether the various parties were right to dislike him, whether they should have used other means to make their point—all topics for another day. In the current case, no matter what anyone thinks of President Trump, House Republicans or Democrats, Senator McConnell, Speaker Pelosi or anyone else in the ongoing theatrical production known as impeachment, US stocks have spoken loud and clear in 2019 (to date): They don’t care one whit about impeachment. 

Well, Prime Minister Boris Johnson has done it. Nearing four years after the UK’s referendum, it now seems almost certain the UK will officially leaving the EU early in 2020, following an election most have justifiably described as a landslide for the Conservative party and a rout for Labour and the Liberal Democrats.