Chairman's Message: We're Not in the Same Boat

Video Transcript:

Several days ago, a family member passed along writings by an unknown author. The message was that, over the past weeks of sheltering in place, we’ve often heard “we are all in the same boat,” but that’s not true.

We are in the same storm, but not in the same boat.

Your boat could be shipwrecked and mine might not be. Or vice versa. For some, quarantine is optimal. A moment of reflection, of re-connection, easy in flip flops, with a cup of coffee or a glass of wine. For others, this is a desperate financial and family crisis. Some who live alone are facing endless loneliness, while others relish the peace and rest. Some have been near death from the virus, some have already lost loved ones from it, and some are not sure if their loved ones are going to make it. Others don’t believe this is a big deal.

So, we are not in the same boat. We are experiencing a time in which our perceptions and needs are completely different.

We are all on different ships during this storm, experiencing a vastly different journey.

I’ve thought a lot about this as the world slowly begins to emerge from lockdown. The “we are not in the same boat” metaphor seems particularly apt for the economic recovery that is beginning. Throughout this pandemic, certain businesses like grocery stores, logistics companies, and pharmacies have prospered while travel and hospitality have virtually stopped. American Express reported that travel and entertainment spending by cardholders fell 95% over the last few weeks, while Delta Air Lines expects revenue over the next quarter to be down 90%. It’s tough to get worse than that. B.E.A.C.H. stocks, the acronym for Booking, Entertainment & Live Events, Airline, Cruise Lines & Casinos and Hotels & Resorts, have lost over $300 billion in market value during the last month. The road to recovery will not be steady and uniform; there will likely be fits and starts, and certain industries will recover well before others. One size doesn’t fit all; we are not in the same boat.

Unlike the 2008 financial crisis, the government has responded with unprecedented monetary and fiscal coordination to ensure people can pay their bills and businesses avoid bankruptcy. Our central bank, the Federal Reserve, has been proactive, reducing interest rates and expanding its balance sheet to approximately $6 trillion. This is the highest it’s ever been, and it could go up considerably more. The Fed is serving its role as lender of last resort and market liquidity provider, generating a backstop to a degree never seen before to make sure credit markets work properly.

Economic policy initiatives will almost certainly continue to grow, as well. While the newly authorized boost to U.S. small-business funding could run out again shortly, we might still see a payroll tax cut, tax deductions for leisure and hospitality, oil relief, and liability protection for employers. Democrats are focused on aid to state and local governments, extending unemployment benefits, renewable-energy tax credits, an Affordable Care Act special enrollment period, OSHA rules for healthcare workers, and election funding to allow voting by mail. The historic nature of the economic and health collapse, particularly during an election year, will likely get the U.S. one more fiscal package, though it will take some negotiation.

Surveys indicate Americans remain hesitant to re-engage the economy in places the virus could spread, even when lockdowns are lifted. People won't come out from quarantine until they feel safe. This is a behavioral change, and it looks durable, at least until there is a medical solution to the medical problem of COVID-19. A move back to full capacity seems unlikely in industries that are affected disproportionately by social distancing like retail, travel, leisure and hospitality, or where work cannot be done at home (e.g., mining, construction, and manufacturing). The U.S. employs a significant number of workers in these areas.

The health vs. economy debate is likely to continue throughout this storm.

Quarantine has also allowed us to re-examine priorities and focus on things that truly matter in life, including our faith, our health, our friends and families. Part of our commitment is to help you think strategically about the future—not just the economy and market outlook, but broader conversations about work, family, and the world. In the coming weeks, we’ll invite you to join a series we’ve titled, “Road to Recovery,” during which we’ll host subject matter experts across a wide range of fields. These webinars and written communications will address a variety of issues which affect our families and our businesses. We invite you to submit ideas about what you want to learn as it relates to your business, your wealth, and your legacy.

Regardless of which boat you’re in, we’re in this storm together. Thank you for the continued confidence you place in our firm.