We hope you are safe, healthy, and coping well during this unprecedented time in our country’s history. Not since World War II have Americans been tested to such an extreme. In less than four months, we have learned that our resilience has no limits when we work together to protect our health and welfare. If we can survive this, we can survive just about anything!

As catastrophic as it has been economically, the shutdown appears to be working. Over the past month, the infection rate has been reduced, and 94% of the country will be open or begin opening by the end of May, according to Strategas Research. Central banks around the globe are injecting over $6 trillion of financial aid to workers and businesses in the U.S. alone.

Capital markets have stabilized and recovered much of their losses. Judging by the stock market, you’d think we’re on track to return to normal by the end of the year. Despite the global calamity unfolding around us, the S&P 500 index is down only 13% year to date through May 14, after rising more than 30% in 2019. The resilience of stocks is nothing short of remarkable, but it seems many investors believe that the economy fell so far and so quickly in March and April, that it can only get better from here.

However, we believe this may just be the calm inside the eye of the storm. The next phase of the storm lies ahead of us: a severe recession caused by tremendous slack in the global economy as a result of lower demand, lower productivity, and supply disruptions.

We have a way to go before this storm is over. In April, an estimated 27 million Americans were either unemployed or stopped searching for jobs, and the unemployment rate may approach the 30% levels seen during the Great Depression. The $6 trillion in fiscal and monetary aid has been the financial equivalent of triage, not stimulus. It barely plugged the hole caused by the shutdown, and more cracks are threatening to burst in the coming months. Future rescue programs will be more challenging to get through an increasingly divided Congress. The crash in consumer spending drove the personal savings rate above 13% in March, a rate last seen during the oil embargo in the 1970s. The gradual reopening will relieve pent-up demand, but activity will not rebound to pre-crisis levels as the effect of the virus on society will be felt for years, even after a vaccine is discovered. Even in phases three and four of reopening, people will likely avoid planes, public transportation, restaurants, and stores, especially in major metropolitan centers. We believe it will be at least two years before employment, consumer spending, business investment, and supply chain activity return to pre-COVID-19 levels. We believe that dominant companies like Amazon will become even more influential in the post-COVID world, and that tepid economic growth, higher government deficits, and broader income and wealth inequality will unfortunately prevail for longer than we’d like.

Every month, our Investment Committee updates our list of What Can Go Right and What Can Go Wrong, developing our view of what is not already priced into the markets. (Hint: if you hear about it on the business news channels, it’s usually priced in.) As the market marches higher and the economic growth marches lower – into negative territory – our list of what can go wrong is getting longer. Meanwhile, our list of what can go right has been getting shorter. It ultimately boils down to one big catalyst: thorough and expeditious vaccination. Until we solve the pandemic, nothing else really matters.

We believe this explains the baffling resilience in the stock market in the face of so much gloom. Investor sentiment may be divided across a dozen bad things, but everyone can get behind one good thing. This is especially the case when the top five stocks in the stock market (Facebook, Apple, Amazon, Microsoft, and Google) make up more than 20% of the index and move somewhat in tandem. The business of these winners thrives during the age of physical distancing, and many of their employees can work remotely. They will likely continue to thrive as we come out of this crisis, as well.