Coronavirus Economics

§Weekly unemployment claims§March 14: 282,000§March 21: 3,300,000§March 28 6,600,000

§Saint Louis Fed President James Bullard:§Unemployment rate may hit 30% in 2nd Quarter§Gross Domestic Product may fall 50%

Sudden and Steep

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Market Impact

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MSCI All Country World Index

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§Policy Recession§Caused by Federal Reserve

§Financial Crisis§think Great Recession

§“Real” Recession§What we’re facing now

Types of Recessions

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§Global “supply chains” have been disrupted.§Manufacturers can’t get components.§Wholesalers can’t get inventory.§Consumers can’t buy.§Workers can’t leave the house.§Businesses like restaurants are closed to the public.

(except for deliveries, in many cases)

Supply-Side Shocks

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§V Shaped§Typical of a Real Recession

(most likely scenario)§U Shaped§Typical of a Financial Crisis

(less likely scenario)§L Shaped§Worst case scenario

(and extremely unlikely)

Types of Recoveries

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It’s not fiscal stimulusIt’s fiscal support

$2 Trillion CARES Act

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§ Individuals: $560 billion§ Cash payments: $300 billion§ Expanded unemployment: $260 billion

§ Small Business: $377 billion§ Emergency Grants: $10 billion§ Paycheck Protection Program: $350 billion§ SBA debt relief (6 months): $17 billion

§ Big Business: $500 billion§ Public Health: $153 billion§ State & Local governments: $340 billion

$2 Trillion CARES Act

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Fed announces $2.3 trillion program to lend to cities, states, and businesses.

§ Anheuser-Busch is producing hand sanitizer.§ Gap, St. John Knits, and Armani are producing masks,

gowns, and scrubs.§ Bloom Energy refurbished 170 ventilators over a weekend.§ Nectar Products pivoting from ultrasound to ventilators.§ 3 dozen COVID-19 vaccines are under development.§ Jockey gearing up to make 50,000 isolation gowns/week.§ Bill Gates: setting up production for 7 vaccines under

development though only 2 will likely “make it through.”

Resilience

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§Are we “bending the curve”?§When will effective therapies emerge?§How quickly can we expand testing regimes?§When will we have a vaccine?§When can people safely return to work?§Will businesses find creative ways to stay open?§Will there be another wave in the Fall?

Key Questions

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Market Impact

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MSCI All Country World Index

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Market Impact

110% 5% 10% 15% 20% 25% 30%

DFA EMERGING MARKETS VANGUARD TOTAL INTERNATIONAL …

DFA INTL SMALL CAP VALUEDFA U.S. MICRO CAP PORTFOLIODFA INTL SMALL CO PORTFOLIO

DFA INTERNATIONAL VALUEDFA U.S. SMALL CAP VALUE

VANGUARD 500 INDEX FUNDDFA U.S. LARGE CAP VALUEDFA GLOBAL REAL ESTATE

March 23 to April 8, 2009

§ The immediate economic impact of COVID-19 has been of almost unprecedented magnitude.

§ The ”supply-side” shock to the US and global economy may give us a steep, but short recession and a ”V shaped” recovery.

§ The stock market will move not when solutions are in place but when they are “on the horizon.”

§ The US and other governments have taken extraordinary measures to ”keep the pipes open” and ensure that otherwise viable businesses don’t fail.

§ Only time will tell how effective today’s actions will be, but human resilience and ingenuity have been impressively on display.

Summary

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And, as always, remember to breathe

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Questions?

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Thank you for joining us!

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