Virus Relief Programs: What to Watch
Last week’s “Behind the Markets” hosted two podcast conversations covering the coronavirus, discussing how various countries such as Sweden are managing to keep their economies open, and what the implications of different government relief measures are.
In the first podcast, we spoke with Samuel Rines, Chief Economist at Avalon Advisors, on how their team evaluates the current dynamics and how to position portfolios.
Our second conversation focused on small businesses and how two companies are navigating the new loan programs being offered. One in particular is helping small community banks speed up the loan application process.
- Rines is closely watching the credit markets, given the recent programs introduced by the Federal Reserve (Fed), and he believes there is even more tightening of yield spreads that should result from the Fed’s packages. Rines highlighted investment-grade municipal and corporate debt as two areas of opportunity. With the Fed buying these instruments, the perceived credit risk is reduced, offering good relative yield.
- Rines described the Fed’s programs as dynamite blasting through any clogs in the flow of credit. He believes the Fed has more dynamite and it will continue to blast through any credit dams blocking up the system.
- Rines believes the markets likely overreacted in pricing in the worst possible reaction on the downside and may now be pricing in a better-than-likely recovery. Companies may have a stronger savings mindset, with more cautious hiring and travel plans. The restart of the economy will have several bumps and a number of false starts along the way.
- Rines has a number of “alternative data” high-frequency indicators he’ll be watching, such as TomTom traffic data, OpenTable restaurant data and FlightTracker24 data on airplane landings. To stay up to date on Rines’ latest thoughts, you can sign up for his daily market commentary here.
On the small-business side, Enrique Mendoza, CEO of Bowstring Studios, described his firm’s content production services. Last year he shot videos in 33 different countries, and now production has been shut down entirely. Yet he highlighted how important partnerships and relationships are, as his team is working on helping universities, health care services and even financial service companies tell their stories now. He’s currently trying to apply for the Paycheck Protection Program (PPP) but has found that some of the big banks opened their application window and then shut it almost immediately.
As firms look for options beyond the big banks, Neal Patel, Founder and Chief Appraiser at Reliant Business Valuation, created a website to help community banks manage the application process. His firm previously advised SBA lenders on business valuations for mergers and acquisitions (M&A) transactions, and they were able to pivot their technology to help banks through this novel lending program.
This discussion was very much a report from the “front lines” on how small businesses are managing this shutdown and how the SBA lenders are providing support to these small businesses. Please listen to the conversations with our guests below.
Jeremy Schwartz has served as our Global Chief Investment Officer since November 2021 and leads WisdomTree’s investment strategy team in the construction of WisdomTree’s equity Indexes, quantitative active strategies and multi-asset Model Portfolios. Jeremy joined WisdomTree in May 2005 as a Senior Analyst, adding Deputy Director of Research to his responsibilities in February 2007. He served as Director of Research from October 2008 to October 2018 and as Global Head of Research from November 2018 to November 2021. Before joining WisdomTree, he was a head research assistant for Professor Jeremy Siegel and, in 2022, became his co-author on the sixth edition of the book Stocks for the Long Run. Jeremy is also co-author of the Financial Analysts Journal paper “What Happened to the Original Stocks in the S&P 500?” He received his B.S. in economics from The Wharton School of the University of Pennsylvania and hosts the Wharton Business Radio program Behind the Markets on SiriusXM 132. Jeremy is a member of the CFA Society of Philadelphia.