By Rick Lear, Lear Investment Management
Jimmy Fallon, Brendon Urie & The Roots Remix "Under Pressure" (At-Home Instruments)
Under Pressure was released the summer of ‘81 and remains relevant three decades later (rendition from recent Tonight Show in link above). The song by two rock-n-roll hall-of-famers Queen and David Bowie is best known for the bassline, but also has a lyric that reminded us of the current challenge facing the scientific community. It is science vs. the virus in a battle for the global economy.
Since the 1Q19 update titled Experts Only, the S&P 500 reached all-time highs with the technology sector leading the charge. We are proud to report our conviction in select technology names led to a strong rebound for the portfolio. As of 4/25/2019, the Global Vigilance Composite was up 12.6% (gross of fees).This includes the average of 50% in defensive assets.
How will people feel comfortable gathering at a sporting event, flying, eating out or sending their kids to school? Increased knowledge of the virus led to a gradually reopening of the economy, but it appears a vaccine and/or therapy will be the next antidote to alleviate the fear.
1. Current Virus Data: A deeper understanding of the limited number of people affected by the virus was the initial step to returning to “normal” activity.
Consider Texas as an example of knowledge being an antidote to the fear. There are 30 million people residing in the Lone Star State. There have been 1,400 deaths from the virus. The mortality rate is .02% of the total state population. The total number of people infected is 45K with 21K recovered.
In California, there are 39 million residents and 4K deaths. Of Florida’s 20 million residents, there are 2K deaths. The largest problem states are New York and New Jersey with 40K deaths combined. Further problem states are MA, PA, IL and MI with 20K combined deaths. (We are currently drafting a paper on the role of public transportation on transmitting the virus.)
Even with the data revealing that the odds of a fatal outcome for those outside of NY and NJ are low, there needs to be more assurance before citizens will venture back to normal behavior. The real “get of jail free card” will be a therapeutic and eventually a vaccine.
2. Bridging the Gap: The world now turns to scienceandmedicinetosolvethiscrisis. Whilethe discovery process is underway, the government has attempted to bridge the economic gap with record amounts of relief to small businesses and those unemployed. Relief funds will not last forever, but it has “bought” time for the scientific community.
Vaccine: The search for a cure is off to a strong start with the community bonding together to dedicate massive resources to the efforts. There are currently +20 vaccine candidates in human testing around the world. The list of promising candidates spans the largest pharmaceutical, biotechnology and medical universities around the world. Experts estimate that a fast-tracked vaccine development process could speed a successful candidate to market in approximately 12-18 months – if the process goes smoothly from conception to market availability.
Therapy: With the vaccine over a year away, a therapy to help those hospitalized by the virus could be a more immediate antidote to the fear. The drug Remdesivir is an example of promising treatment currently used to speed-up recovery times.
With the brightest minds in world focused on the matter with financial backing from deep pockets like the US Government and The Gates Foundation, we believe this “pressure” will result in a positive outcome.
Rick Lear is the Founder and Chief Investment Officer of Lear Investment Management. Lear is a pure investment firm founded in 2015 with focus on generating returns with measured risk. With over two decades of experience, his ability to identify global investment trends has resulted in superior outcomes for clients.
The Lear Global Vigilance Strategy is rated 5 Stars by Morningstar and ranks in the 5th percentile of managers in the Tactical Allocation category.
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