National Conference Call – March 17, 2020

Dear Valued Clients and Friends,

Today we hosted a national conference call to offer our best perspective on the lay of the land in this coronavirus/market distress.  We took questions from all over the country, and remain open to any additional questions you may have (send to

  1. Introduction

    1. Thoughts and Prayers
      1. 190,000 diagnosed worldwide
        1. 7,500 fatalities
        2. 81,000 recovered
        3. 102,000 active
      2. 5,696 diagnosed in America
        1. 97 deaths
        2. 74 recovered
        3. 5,525 active
        4. But way under-tested
    2. Market reaction
        1. Three weeks ago – down 4,000
        2. Two weeks ago – up, down, up, down – up 400
        3. Last week – down 2,000 (Mon crash, Tue rally, Wed drop, Thurs crash, Fri rally)
        4. Yesterday – down 3,000 (today, up 1,000)
    3. Purpose of call –
      1. Where we go from here (two levels)
      2. What we do from here (practical)
  2. Current phase in the markets (level one – the present)

    1. Forced selling in a leveraged financial system
      1. Role of Margin/debt
      2. Safety becomes unhelpful
        1. Utilities down same as S&P and REIT’s down MORE than S&P?
        2. Gold from $1,700 to $1,475
    2. Fundamentally weak equities leads to dislocations across all asset classes
  3. Intervening Catalysts

    1. Monetary Policy
      1. Bazooka –
        1. ZIRP, QE4, Commercial Lending Facility, Repo market, swaps with foreign central banks, no interest charged on excess reserves, bank reserve requirements scrapped
        2. Kitchen sink! (“whatever it takes”)
      2. Not really about consumer borrowing; that is side effect – it’s about ample liquidity and functioning credit markets
    2. Fiscal Policy
      1. Phase One – $8.3 billion, already passed a few weeks ago, small ball stuff for medical care and testing
      2. Phase Two – support for paid leave, unemployment insurance,
      3. Phase Three – Mnuchin presented this morning a request to Congress of $850 billion
        1. Tax deadline pushed off to summer
        2. Airlines, Hospitality direct support – think auto 2008
        3. “checks straight to Americans” – $1,000 – married 100k or less, single 50k or less
        4. Relief for more lending capacities/SBA/direct to American business
        5. Payroll tax relief
    3. HEALTH IMPROVEMENT – this is the real key: How successful will they be in slowing the spread of this virus?
      1. Nation on a virtual lockdown
  4. Next phase – staying invested required for all three; staying prudent required for the bear case

    1. Base case – Q2 GDP debacle, late Q3-early Q4 rebound, heavy fiscal and monetary support – normalization by year end
    2. Bear case – Q2 and Q3 debacle, slow growth recovery after that (recession of 6-12 months)
    3. Bull case – Q2 GDP debacle, Q3 V-shape rebound, highly contained health damage, heavy fiscal and monetary support – normalization sooner than expected
  5. Portfolio Implications

    1. Municipal Bonds – the market is dislocated because these are the highest quality, most attractive assets many own; forced selling has widened spreads so we prefer to leave these in place
    2. Taxable Bonds – for mortgage-backed securities, they are normalizing; bank loans and High Yield dislocated; Treasuries fine
    3. Alternatives
      1. What has held up well (category)
      2. Where there is stress, why
      3. Illiquidity
    4. Re-balance plans
      1. We plan to take 25-30% out of bond positions into cash when the bond market normalizes, spreads come in, etc.
      2. So depending on if one’s bonds were 25-40% of their portfolio, that creates a 7-12% cash amount to average in over rest of the year, not sink at once
  6. Q&A

With regards,

David L. Bahnsen
Chief Investment Officer, Managing Partner

The Bahnsen Group

This week’s Dividend Cafe features research from S&P, Baird, Barclays, Goldman Sachs, and the IRN research platform of FactSet

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The Bahnsen Group is registered with HighTower Securities, LLC, member FINRA and SIPC, and with HighTower Advisors, LLC, a registered investment advisor with the SEC. Securities are offered through HighTower Securities, LLC; advisory services are offered through HighTower Advisors, LLC.

This is not an offer to buy or sell securities. No investment process is free of risk, and there is no guarantee that the investment process or the investment opportunities referenced herein will be profitable. Past performance is not indicative of current or future performance and is not a guarantee. The investment opportunities referenced herein may not be suitable for all investors.

All data and information reference herein are from sources believed to be reliable. Any opinions, news, research, analyses, prices, or other information contained in this research is provided as general market commentary, it does not constitute investment advice. The team and HighTower shall not in any way be liable for claims, and make no expressed or implied representations or warranties as to the accuracy or completeness of the data and other information, or for statements or errors contained in or omissions from the obtained data and information referenced herein. The data and information are provided as of the date referenced. Such data and information are subject to change without notice.

This document was created for informational purposes only; the opinions expressed are solely those of the team and do not represent those of HighTower Advisors, LLC, or any of its affiliates.

About the Author

David L. Bahnsen


David is a frequent guest on CNBC, Bloomberg, and Fox Business and is a regular contributor to National Review and Forbes. David serves on the Board of Directors for the National Review Institute and is a founding Trustee for Pacifica Christian High School of Orange County.

He is the author of the books, Crisis of Responsibility: Our Cultural Addiction to Blame and How You Can Cure It (Post Hill Press), The Case for Dividend Growth: Investing in a Post-Crisis World (Post Hill Press) and his latest, Elizabeth Warren: How Her Presidency Would Destroy the Middle Class and the American Dream (2020).


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