“The way to get started is to quit talking and start doing.”
Walt Disney
We hope this post finds all of you well and virus-free. As we study the first quarter and contemplate the reopening of the economy, Walt Disney’s words ring true.
In a way, 2020 has exhibited the elements of a Disney movie: a positive setup, deadly confrontation and plenty of emotional swings. Heroes have emerged from unlikely places. Characters are demonstrating resilience; there is a focus on the common good. The reopening of the economy represents the final act, and the Disney theme parks warrant monitoring as a barometer of our progress.
Setup: Good Times. The Dow Jones Industrial Average peaked on February 12th at 29,551.42. The first 43 days of the quarter (January 1 to February 12) saw unemployment near a 50-year low, a 13-year high in new home building permits, a trade deal with China, oil at over $50 / barrel and a continuing bull market.
Confrontation: Deadly Whipsaw. COVID-19 dominated the last 48 days of the first quarter. The economic consequences were severe: record declines in all three major U.S. equities indices, the largest number of weekly unemployment claims ever recorded since the government began collecting data over 50 years ago, a 60% decline in the price of oil, and a record low yield for U.S. Treasury bonds. In short: the first quarter of 2020 was the Dow’s worst first quarter in 124 years.
Resolution: The Disney Index*. Like Walt Disney said, “The way to get started is to quit talking and start doing.” Significant issues remain regarding whether the markets will retest the bottom set on March 23rd and the impact of expected bankruptcies in the energy, retail and hospitality sectors. Nonetheless, we are encouraged the country is moving toward reopening.
Disney (the company) bears watching in this context. Worldwide park closures, cancelled cruises and lack of content (no live sports, delayed production of television and film projects) combined to derail Disney’s share price in the first quarter. However, Disney is a technological leader, especially in its parks (i.e., efficient handling of crowds, surveillance and tracking). Encouraging developments we hope to see: a willingness to open, even at partial capacity; demand that exceeds capacity; the use of technology for social distancing and virtual queues; and temperature checks in the security lines. A successful reopening of the Magic Kingdom would be a positive harbinger for the national economy, especially given the current unemployment numbers and wreckage of the first quarter.
Looking forward, our next post will provide you with a shelter-in-place homework assignment. Thanks for reading, and remember to reach out if there is anything we can do for you.
* The Disney Index is an expression of sentiment and deep-thinking; not a hypothetical portfolio of securities representing a particular market or segment of it.
The information, analysis and opinions expressed herein are for general and educational purposes only, and do not constitute investment, legal or professional advice. Statements of future expectations, estimates, projections, and other forward-looking statements are based upon available information. Actual results, performance, or events may differ materially from those expressed or implied in such statements.
Sources: DJIA first quarter chart, National Conference of State Legislatures, MarketWatch, Business Insider, Politico, CNBC.