- Jackie Ross
- 4 min read
Updated: Apr 17, 2020
Hi Gang,
Lots to share with you today (Wednesday, if you’re wondering). First, we received a really impressive response to this brief survey – I’ll give everyone one more night to complete and then share the results (please take it if you haven’t). For now, two quick previews…
How Are You Feeling?
Attached is a word cloud of your responses. The size of the word on the slide represents the number of times it was used. You’re mostly anxious, uncertain, tired, concerned but also HOPEFUL!
Top 5 Questions You’re Asking
We received more than 70 questions from you; these at the most commonly asked. (Please reply to me if you have answers that I can report back)
What aspects or changes to your business model do you anticipate will remain long-term, post-COVID-19?
How can you access capital or funding in this environment?
Are labs still operating? If so, on what level? How are you maintaining productivity?
How are you keeping employees motivated, engaged and connected?
Has attention turned to longer term planning yet, and if so, how?
Resources & News of Interest
Couples Have a Working-From-Home Revelation: That’s What You Do All Day?
San Francisco Real Estate Market Update – Here is a great monthly report from an agent in the Bay Area. Perhaps interesting to candidates considering relocation or those of you being pushed to the brink in a confined space!
Financial Update from Investment Bankers – Below my signature is an update on the market from UBS… glimmer of positive news today. I also included high-level takeaways from our direct conversations with bankers in the NY area.
A Little Levity
On a personal note, it’s been such a pleasure to hear from so many of you during this time – thank you so much for your inputs, your support and your friendship.
Jackie
Financial Update from UBS
US equity markets surged today, with the S&P up +9.38%, rebounding from its lowest level since 2016, as investors turned risk-on with Congress close to the finish line on the unprecedented Phase Three $2tn stimulus package
The Dow gained +11.37% today, in the biggest rally since 1933
Volatility fatigue is a notable theme, as the VIX declined for a 4th straight session, which is the first time we have seen that since the start of the sell off
VIX Curve steepened as front-end volatility fell implying that the most intense period of the selloff may be behind us (high correlation between the VIX curve and medium term S&P performance)
Wuhan reopening in early April is hopefully a playbook for the rest of the world, as UBS Evidence Lab notes China's manufacturing and consumer spending looks to be well on its way toward full recovery
Ocean exports have fully recovered
Consumption hovering around 85% of normal
Online sales have normalized
Total migration back into manufacturing provinces since Chinese New Year is >80% of normal (potentially fully normalizing in 2 weeks)
The Fed's balance sheet growth is staggering. At current pace, UBS rate strategy thinks Fed's open-ended purchases will approximate $1.5tn each month
For context, after all the QE programs post the financial crisis, the Fed’s balance sheet stood around $4.5tn – a level reachable after three months at this pace
As pensions rebalance towards month end, if history is any indication, pensions typically bought 50-75% of their equities mandate during various crises in the past (e.g. Financial Crisis, 9/11)
They are expected to deploy $200bn into quarter end, and even if the final inflow is 50% of that, it’s still a massive boon for equities
Our trading desk was better to buy (80% buy/20% sell) out of the gate – across most sectors – and finished the day 60/40%. Hedge funds were heavily skewed to buy side. Long only flow more mixed – finished the day better for sale
Broad risk-on tilt to the tape, with cyclical (and most beaten down) sectors Energy, Industrials/Materials & Financials rallying most as Communication Services, Staples & Utilities underperformed
Action and flow would suggest majority of buying today is covering
Current peak-to-trough of S&P 500 is ~34% (before today’s rally) – how does this compare to other economic crises?
On par with the crash in 1987
2008-2009 crisis was a 57% decline
Dot com bubble was a 49% drop
1973 oil crisis was a 48% decline
Bear market during Nixon era was a 36% decline
Great depression was an 86% drop
WWII caused a 77% drop
RRA’s Conversations With NY-Based Bankers
Shelter-in-Place
Best-case scenario, it will be another 3-4 weeks for NY and CA, but likely longer. Other states are not even on the radar yet and likely to have even steeper curves.
Investing Landscape
Life sciences investing has held up pretty well; there’s an increased focus on corporate preparedness (preparing for activists/unsolicited takeovers).
Some larger clients don’t want to seem predatory but are taking advantage of lower valuations, so there’s an uptick in partnerships.
Equity capital markets are essentially shut down, so biotechs will start feeling the pinch.
We’ve shifted from being a seller’s market to a buyer’s market – large pharma are in the driver’s seat again, and biotechs are there to listen.
Trial Timelines
Big pharma, likely a 6-month delay for all trials; closer to 3 for biotech.
A lot of the hospitals in NY have closed their facilities to clinical trials.
FDA is giving more leeway regarding changing trials and moving to virtual follow-ups, but it’s not enough to withstand the delays.
Likely a good time for digital health companies to expand.