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Austin gives his perspective on how the CARES Act will impact investors.
My teammates Matt, Simon, and Steve covered the details of the $2 trillion CARES Act well. Matt wrote about the size, speed, inefficiencies, and effectiveness of the act (thus far). Simon wrote about some of the potential implications for healthcare spending and potential economic impacts of the Paycheck Protection Program. Steve discussed how the market rebounded strongly from its March lows after the act was announced.
I’m spending a lot of time thinking about what it means for the future. Fortunately, the act provides support for both individuals and businesses as mentioned by my teammates. However, I’m fairly confident that some of the businesses that were already in trouble before COVID-19 will be saved in the short-term, but ultimately still face insolvency, even once the economy is in the “recovery phase.” I’m curious if that will cause another potential economic downturn, or alter the economy enough to impact some of the sectors and specific companies that rebounded as a result of the lifeline provided by the CARES Act.
Investor takeaway: It is impossible to know how this all plays out. Investors focus their attention on companies with strong balance sheets and resilient business models that enable businesses to sustain a potential extended economic downturn.
