The exogenous shock of COVID-19 and subsequent global shutdowns precipitated the fastest selloff of stocks anyone has ever experienced, not to mention the highest VIX close ever. While all asset classes were being sold in concert in a stampede for cash, there was nowhere to hide. The six million dollar question is “what will things look like on the other side?” There will be clear winners and losers in individual stocks and bonds, and we have already seen an incredible rally from the lows. If history is any indicator we have not seen the lows yet, but then again we could also be in a “this time is different” scenario.
Post the GFC, passive investing exploded in popularity and, perhaps by a self-fulfilling prophecy, outperformed active investing by most measures – a 2019 Morningstar report said that over the prior decade, only 23% of active funds managed to both survive and to outperform their passive peers (and honestly, what are the odds that you picked one of those funds?).
Post 9/11 the world changed and post COVID-19 the world will change too. These changes will impact how we live, how we shop, how we travel, how we work, how we interact, how we gather…and all of these changes will affect companies large and small. Some companies are in a position to prosper while others will fail.
Undoubtedly, new companies will be born of this pandemic. Times of great disruption bring about new and different ways of thinking where innovators and entrepreneurs will thrive. Regardless of where you stand in the debate, active managers have a real opportunity to put their talents to the test.
Active managers can track all things related to company impacts and mitigation efforts here: https://tracker.boardroomalpha.com/covid