1. Cash and Investment Strategy and 2. Vaccine News

Cash and Investment Strategy

Market Rally

It's fair to say that the market run we have seen over the course of the last two weeks has been unexpected. Many were predicting the market would collapse based on election uncertainty. As it turns out, the market is looking past politics and towards the future potential of the economy (despite today's headlines about rising Covid cases around the country). Still, it seems as if market optimism rules the day.

Timing and Luck

There can be no better example than these last two weeks of why attempting predictive market timing can be so fraught with challenges. As I often say, market timing requires you to be right twice and that is often-times a difficult task. This is not to say having a bit of cash is a bad idea. In some cases, a small reserve of cash makes complete sense particularly if risk factors increase based on economic and global uncertainty. This is proactive positioning rather than market timing and there is a distinct and important difference between the two.

Cash Strategy

I am sometimes asked what our strategy is in pursuing new opportunities for any cash holdings that may be held in portfolios. I can assure you that we are having robust discussions internally about the best path forward and we are carefully considering where to allocate funds. It's a deliberate process and one that is rooted in our belief that theme projections makes sense.

I thought it might be helpful in this week's update to share with you several broad theme categories we are currently investigating. It may give you some insight and assurance as we allocate assets. These broad categories are not necessarily appropriate for every investment strategy so do not conclude that because you see a category listed that will necessarily result in an asset theme moving into your portfolio strategy. But this summary should give you an idea of how we're thinking about the investment world. I think transparency is very helpful (particularly in today's uncertain world).

Category Themes

Broad category themes we are currently investigating include the following:

Recovery stocks geared to return to normalcy

• The world will not be in lockdown on a permanent basis. Vaccines are coming despite the difficult headlines and a bounce back in economic activity will likely occur in 2021.

Out-of-favor stay at home stocks

• Certain companies that benefited from stay-at-home behavior by consumers and businesses are losing some luster as investors are hopeful that the economy will reopen. Still, one cannot dispute that business will operate in different ways going forward and there are companies that will benefit from that permanent shift in behavior.

Stocks that can persist through the pandemic due to business trends

• Broad themes guide our overall investment strategy and businesses/companies that are leaders in areas with thematic tailwinds we find very attractive. Identifying themes that benefit from strong cash stable flow despite economic headlines hold merit.

Discount retail adapting to online threats

• Retail is changing. Certainly, online retail will continue to thrive as well as companies that can adopt online strategies combined with a physical presence. Flexible retail businesses will win in the long term.

International Assets

• While we continue to believe that US-based assets should remain core to our investment strategies, there are signs that certain international assets may be attractive. Our contacts on a global basis allow us to investigate these opportunities.

Transparency

• I thought it would be helpful to provide insight into how we determine how to position portfolios (including utilizing any cash held in accounts). I'm hopeful this gives you an idea of how we make judgments and the rigor of our analytic process as we position portfolios.

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Vaccine Breakthrough 
 
I’m sure you have heard that there are two potential vaccines that have efficacy levels of over 90% utilizing a new technology called mRNA. I thought it might be helpful to give you a brief summary as provided by 2 publications highlighting this new vaccine development method.
 
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Begin Quote
 
“A whole new type of vaccine

mRNA vaccines trick the body into producing some of the viral proteins itself. They work by using mRNA, or messenger RNA, which is the molecule that essentially puts DNA instructions into action. Inside a cell, mRNA is used as a template to build a protein. ‘An mRNA is basically like a pre-form of a protein and its (sequence encodes) what the protein is basically made of later on,’ said Prof. Bekeredjian-Ding.
 
To produce an mRNA vaccine, scientists produce a synthetic version of the mRNA that a virus uses to build its infectious proteins. This mRNA is delivered into the human body, whose cells read it as instructions to build that viral protein, and therefore create some of the virus’s molecules themselves. These proteins are solitary, so they do not assemble to form a virus. The immune system then detects these viral proteins and starts to produce a defensive response to them.”
 
End Quote 
 
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Source: April 1, 2020 by Joanna Roberts 
https://horizon-magazine.eu/article/five-things-you-need-know-about-mrna-vaccines.html 
 

 
Source: https://www.nationalgeographic.com/science/2020/05/moderna-coronavirus-vaccine-how-it-works-cvd/#close 

Impact
 
It’s a little confusing I know. But essentially, it’s a shortcut way of producing a vaccine basically tricking the body to create antibodies and build immunity.  
 
All in all, positive news. It also means that this technology will now be utilized to develop treatments for other diseases. You will likely see pharmaceutical companies lining up research projects to address a variety of ailments. Perhaps this is a silver lining in the horrible news we are going through now?