Market Observation 2Q 2020 Newsletter
Market commentary can be noisy, and it’s often hard to tell the difference between relevant information and noise. That’s why every quarter our Market Observations newsletter lets you know what articles our advisors are using to form ideas and shape opinions. Take a look at what caught our eye this quarter!
In his latest memo, Howard Marks, the co-founder and co-chairman of Oaktree Capital, looks at the sharp rally that has taken place in the stock market since the end of March. While the rapid spread of the Coronavirus and precipitous drop in the market was shocking to most, the sharp recovery of stocks in spite of the persistence of the virus and the economic damage it has caused has also been confounding to many. In response to the rally, Marks recounts hearing many of the same questions that we are hearing from clients including, "'How can stocks be doing so well during a severe pandemic and recession?' 'Have the securities markets decoupled from reality?' and 'Is this irrational exuberance?'"
Marks looks at the many possible reasons for the strength in stock prices, and the true cause is likely some combination of all of these factors. The recovery, however, has not been evenly distributed, as some companies ─ many of them with online or digital business ─ have seen their stock prices surge to new all-time highs, while others with more cyclically exposed businesses have seen their values continue to languish. Though, in places where stocks have recovered much of their losses, a better question than "why?" may be to ask may be what outlook and future outcomes are now reflected by current prices and what that may mean for future returns. more>
In this deeply personal account of his time spent as a competitive skier, Morgan Housel details how his experience on the mountain shaped his views of risk and how risk affects decision making as an investor. The full story is suspenseful, heartbreaking and worth reading through to the finish, but the events in the story led Housel to understand three different sides of risk: (1) The odds that you will get hit; (2) The average consequences of getting hit; and (3) The tail-end consequences of getting hit. As he recounts, "The first two are easy to grasp. It’s the third that’s hardest to learn, and can often only be learned through experience." more>
Yellow Tail Wine was founded in 2001 as the collaboration between an American importing and distribution company and a family of Australian grape growers. The company's affordable, mass market wine exploded into the U.S. market, rapidly becoming one of the country's best selling wine brands and put Australian wine on the map for the American Consumer. If you've walked down a wine aisle in the last 20 years, you are likely familiar with the brand's signature bottles with brightly colored labels bearing the picture of a wallaby. The story of the brand told in this Vine Pair article is a fascinating account of pairing the right product -- in this case a sub-$10 bottle of wine with an easy-drinking flavor profile -- with opportune timing and excellent marketing leading to one of the fastest growing brands in history. more>