As the United States shuts down in an unprecedented fight against a pandemic and more than three million people file for unemployment in a single week, Wall Street is making its bets on the economic outcome.

The initial response was a 34% sell-off in the S&P 500 over a one-month period, and then a sharp rally on news of government rescue. But investors also need to see how quickly the federal government will be able to act; it won’t be easy to spend more than $2 trillion. The actual course of the virus and how quickly we return to something approaching normal behavior will be the most important factors impacting the markets.
No one really knows, of course. All we have to go on are examples in Asia, where the virus hit first and where economies are now beginning to reopen, and various epidemiological models. But the consensus of economists seems to be a plunge in second quarter GDP of between 10% and 25%, further but more modest declines of about 5% in the third quarter, and the beginning of a recovery in the fourth quarter. For 2020 as a whole, that’s a drop of between 5% and 10% in U.S. GDP, with a loss of upward of 10 million or more jobs. Earnings estimates are notoriously slow to adjust to such a sudden change in circumstances, but we have to assume earnings for the S&P 500 will be down by at least 20% or more.
The Federal Reserve is applying lessons learned from the financial crisis of 2008-2009 in acting as the lender of last resort to support the financial markets. In fact, the Fed is now going far beyond the actions it took during the last crisis in supporting a much broader list of securities, including corporate and municipal bonds. In addition, U.S. banks are in far better shape than they were going into that crisis. They have passed stress tests on their balance sheet that were comparable to the currently anticipated scope of this experience.
Additionally, Congress is attempting to inject $2 trillion into the economy. That represents about 10% of the country’s GDP. Just how quickly and effectively government can get these funds to households and businesses small and large remains to be seen. The timing is truly critical, as it will determine the number of jobs that could be saved and how many households should be able to bridge the gap to recovery.
In the interim, we as a society confront a terrible paradox. The more we shut down to flatten the curve, the more harm we inflict on our economy. The United States, like most of Europe and other developed economies, will be at near maximum shutdown to prevent an exponential spread of the COVID-19 virus while absorbing these expected hits to our GDP. We believe these current extreme measures aren’t economically sustainable. Difficult decisions will likely have to be made that balance health risks against permanent economic damage.
Most long-term investors are by nature optimists – and we count ourselves among them. Our democracy remains well balanced across the three branches of federal government, and the state and local governments. Information is rapidly disseminated and the potential for innovation almost certainly remains unlimited in our free market system. The entire world is now focused on the problem, which leads us to believe the outcome will be better than current consensus, developed under extreme uncertainty.
While it is not possible to predict the bottom of the market, it seems likely that this period will take the shape of a V; a rapid fall followed by a rapid recovery. So trying to time the exact bottom is not that relevant, as we likely won’t be there for long and will not be forced to sell.
The next few weeks will probably be extremely difficult for many people on many levels. We will all be concerned about our personal safety, the effects of unnatural isolation, and the fear of the unknown and the risks to the economy.
As the custodians of family and institutional wealth, our aim is to adjust client portfolios to ensure that they are sustainable through this downturn, with ample cash reserves, and are positioned to take advantage of opportunities as we start to see light at the end of the tunnel.

John Apruzzese is the Chief Investment Officer of Evercore Wealth Management. He can be contacted at

Allocating Capital: Four Essential Guidelines

By Martha Pomerantz

A market timer and his money are often soon parted, especially in the face of recession and a bear market. Here are some of the capital allocation guidelines that we practice in all market environments:

  • Stay focused on long-term client goals. Our asset allocation for each portfolio is aligned with client goals, spending habits, and attitudes to risk. It is essential to never lose sight of these considerations, however dramatic events in the markets might be.
  • Practice disciplined rebalancing. Rebalancing portfolios to maintain individual target asset allocations makes sense in all market conditions. As equity values fall below the target in declining markets, rebalance. As they recover, make sure that the allocation to defensive assets remains on track.
  • Utilize incremental purchasing. Buying at the very bottom, when the outlook is bleakest, is nearly impossible. Instead, we stage investments in a disciplined way. For example, if a 55% allocation to stocks declines to only 45% of the total portfolio allocation after a 30%-plus equity market drawdown, we’ll bring it back to 55% but rarely all at once. Adding exposure in smaller increments as the market declines and as it begins to recover provides investors with multiple good entry points.
  • Value is relative. Market drawdowns are largely indiscriminate, taking down high-quality investments along with the rest. Good investors will always discriminate, looking for the best opportunities in existing and new markets.


We view this current sell-off as an opportunity to further enhance client portfolios, positioning them for strong, long-term expected returns. Investing in bear markets is challenging, both tactically and psychologically. But maintaining investment discipline goes a long way in protecting portfolios in tough times and preparing for better days.

Martha Pomerantz is a Partner and Portfolio Manager at Evercore Wealth Management. She can be contacted at

Evercore Wealth Management, LLC ("EWM") is an investment adviser registered with the U.S. Securities and Exchange Commission under the Investment Advisers Act of 1940. EWM prepared this material for informational purposes only and should not be viewed as advice or recommendations with respect to asset allocation or any particular investment. It is not our intention to state or imply in any manner that past results are an indication of future performance. Future results cannot be guaranteed and a loss of principal may occur. This material does not constitute financial, investment, accounting, tax or legal advice. It does not constitute an offer to buy or sell or a solicitation of any offer to buy or sell any security/instrument, or to participate in any trading strategy. The securities/instruments discussed in this material may not be suitable for all investors. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. Specific needs of a client must be reviewed and assessed before determining the proper investment objective and asset allocation which may be adjusted to market circumstances. EWM may make investment decisions for its clients that are different from or inconsistent with the analysis in this report. EWM clients may invest in categories of securities or other instruments not covered in this report. Descriptions provided in this material are not substitutes for disclosure in offering documents for particular investment products. Any specific holdings discussed do not represent all of the securities purchased, sold or recommended by EWM, and the reader should not assume that investments in the companies identified and discussed were or will be profitable. Upon request, we will furnish a list of all securities recommended to clients during the past year. Performance results for individual accounts may vary due to the timing of investments, additions/withdrawals, length of relationship, and size of positions, among other reasons. Prospective investors should perform their own investigation and evaluation of investment options, should ask EWM for additional information if needed, and should consult their own attorney and other advisors. Indices are unmanaged and do not reflect fees or transaction expenses. You cannot invest directly in an index. References to benchmarks or indices are provided for information only. The securities discussed herein were holdings during the quarter. They will not always be the highest performing securities in the portfolio, but rather will have some characteristic of significance relevant to the article (e.g., reported news or event, a new contract, acquisition/divestiture, financing/refinancing, revenue or earnings, changes to management, change in relative valuation, plant strike, product recall, court ruling). EWM obtained this information from multiple sources believed to be reliable as of the date of publication; EWM, however, makes no representations as to the accuracy or completeness of such third party information. Unless otherwise noted, any recommendations, opinions and analysis herein reflect our judgment at the date of this report and are subject to change. EWM has no obligation to update, modify or amend this information or to otherwise notify a reader thereof in the event that any such information becomes outdated, inaccurate, or incomplete. EWM’s Privacy Policy is available upon request. EWM is compensated for the investment advisory services it provides, generally based on a percentage of assets under management. In addition to the investment management fees charged, clients may be responsible for additional expenses, such as brokerage fees, custody fees, and fees and expenses charged by third-party mutual funds, pooled investment vehicles, and third-party managers that may be recommended to clients. A complete description of EWM’s advisory fees is available in Part 2A of EWM’s Form ADV. Trust services are provided by Evercore Trust Company, N.A., a national trust bank regulated by the Office of the Comptroller of the Currency and/or Evercore Trust Company of Delaware, a limited purpose trust company regulated by the Delaware State Bank Commissioner, both affiliates of EWM. Custody services are provided by Evercore Trust Company, N.A. The use of any word or phrase contained herein that could be considered superlative is not intended to imply that EWM is the only firm capable of providing adequate advisory services. This material does not purport to be a complete description of our investment services. This document is prepared for the use of EWM clients and prospective clients and may not be redistributed, retransmitted or disclosed, in whole or in part, or in any form or manner, without the express written consent of EWM. Any unauthorized use or disclosure is prohibited. The Chartered Financial Analyst and CFA trademarks are the property of CFA Institute. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, Certified Financial Planner™ and CFP® in the U.S.

IRS Circular 230 Disclosure:

Pursuant to IRS Regulations, we inform you that any U.S. Federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for (i) the purpose of avoiding IRS imposed penalties or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein. This information is provided for information purposes only and does not constitute financial, investment, tax or legal advice.

©2016 Evercore Wealth Management LLC. All rights reserved.