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Market Vizion: Bonds, Re-opening, and North Korea


April 28th, 2020

Hello and welcome to another week of quarantine! Hopefully your state is handling things better than my state of New Jersey - we're not very happy. Anyway, I wanted to share three things that we're watching in the markets this week.

Are Bonds Stabilizing?

We've seen some stabilization in pricing with the mortgage bonds and the bank loans, those canaries in the coal mine that we've been talking about. We've seen some stabilization and some starting seeming to find a floor to start to build higher from there.

We're very happy about what we're seeing in the short run. It remains to be seen whether that will be able to be sustainable over the course of the next few months.

States Begin Reopening Economies

The second thing we're looking at is the economic reopening process. What we're seeing with this reopening process (for all of the political banter on all different sides) is that the states are acting independently and that is what the federalist form of government is supposed to do. States are supposed to compete with one another economically and do things differently. We're seeing that now.

The Petri dish analogies and comparisons are appropriate because we are starting to see some states open. In a way, they become the testing Petri dish of whether this is going to lead to even more wide spread breakouts of COVID-19 and those kinds of things. As a result, this is something that will weigh heavily for good or for bad on the market over the next few weeks.

An Eye on North Korea

A  third thing we're watching is the uncertainty about the future and the health of Kim Jong-un, the leader of North Korea. The reason this is important is that there's three or four potential outcomes if he is in fact dead.

One is his sister takes over in which there's probably a relatively seamless transition of power. Another is that there's a military coup that could lead to some destabilization in the region, though they really don't represent a strategic threat to us here in the US.

The third would be really a situation where the country breaks up and destabilizes. The threat is that there's a lot of military infrastructure there that could break up and go into hands of bad actors. These bad actors could show up and do harm to industrialized nations in the form of terrorism at a later date and time.

As a result, the markets will be kind of evaluating that in the coming weeks and months as we get some clarity around Kim Jong-un's actual situation.

Perspective for the Decisions Ahead

As always, we're here for with perspective for the decisions ahead. If you have any questions, thoughts, or concerns, please don't hesitate to reach out. You're never an inconvenience to our day. We always look forward to hearing from you. Take care.