This document discusses myths and realities about the COVID-19 pandemic's impact on the markets and economy. It notes that while the speed of the market decline has been unprecedented, markets have recovered from deeper drawdowns historically. Government stimulus and an end to widespread shutdowns will determine the pace of economic and market recovery. Once containment measures are lifted and information becomes available, markets will recover from their oversold levels, creating a buying opportunity. Investors are advised to maintain discipline and long-term perspectives, rather than trying to time short-term volatility.

1. MYTHS AND REALITIES
THE MARKETS AND COVID 19
MARKET/ECONOMIC REVIEW – MARCH 2020
Sponsored by:
Delta Capital Management
Aegis Wealth Management
Sean Casterline, CFA
Alex Moore
Matt Haushalter

2. OVERVIEW
• Myths
• The Economy
• The Markets
• The Recovery

3. MYTHS
MYTHS
MYTHS

4. MYTH #1 – THE MARKET IS GOING
TO ZERO

6. MYTH #2 – THE ZOMBIE
APOCOLYPSE

7. THE ECONOMY

8. CORONAVIRUS
CASES IN THE
US
Still Rising

9. THE ECONOMY
• How bad will the economy get?
1. The economic impact from supply and demand disruptions will
result in negative growth for Q2 and cause a recession.
2. On the basis that widespread shutdowns remain in place for 10-12
weeks, we think most economies will suffer falls in GDP of
between 10-12% q/q in the first or second quarter of this year.
3. We’ve adjusted our global GDP forecast from +2.9% to -1.0%.
4. We believe most economies will return to their pre-crisis path of
GDP within a couple years.

10. THE ECONOMY
• How bad will the economy get?
1. There is so much uncertainty out there that forecasts are
essentially useless.
2. Here's the big question: has the market already fully priced in
the effects of the recession?
3. This looks and feels more like September 11, 2001 than it does
the 2008 financial crisis. In both of those cases, the public
experienced shock, confusion, and anxiety in the absence of
information available to make rational evaluations –
* It takes time, but the information will come, the crisis will abate, and the markets will
recover.

11. STIMULUS
• Using experience and the 2018 playbook, Congress and the FED
have been proactive:
1. This past week, the Fed engaged in aggressive rate-cutting and
launched a massive $700 billion QE program - It’s nearly impossible to
imagine a scenario where banks do not have access to ample liquidity.
2. The House of Representatives passed a stimulus package that the
Senate appears poised to expand even further, with the potential
to reach $750 billion.
3. The important point, for now, is that coordinated action is being
taken.

12. THE MARKETS

13. When looking at history, markets have gone
through much deeper drawdowns in the past.
However, this is the sharpest decline ever,
meaning that the speed of the decline is the
fastest one ever recorded.
On other occasions, markets declined over
much longer periods of time, and prices had
some sizeable rebounds along the way.
In fact, the past 5 weeks have been the worst
5-week period ever in the history of the stock
market.

14. WHERE WE
STAND TODAY
– S&P 500
The S&P 500 is STILL up 245%
since the low of the last bear market

15. WHERE WE
STAND TODAY
- NASDAQ
The NASDAQ (heavy tech index) is
STILL up 443% since the low of the
last bear market.

16. VALUATIONS
ARE DOWN
DRAMATICALLY
Forward P/E Ratio

17. FORWARD
EARNINGS
YIELDS UP
DRAMATICALLY
Forward earnings yield

18. INVESTORS
ARE
PANICKED
Global optics show fear

19. INTERNAL
INDICATORS
ARE EXTREME
Almost no stocks above their 200-
day moving average.

20. INTERNAL
INDICATORS
ARE EXTREME
New highs as % of S&P

21. INTERNAL
INDICATORS
ARE EXTREME
Investors Intelligence Advisors
extremely bearish

22. The behavior of the stock market is not even
comparable to what happened during the
Spanish Flu Pandemic in 1917-1918.
The Spanish Flu infected 500 million people
- about a quarter of the world's population at
the time - and the death toll is estimated to
have been as high as 100 million by some
accounts.
The Dow Jones declined by 33.47% over
several months during that period, but the
decline was not as sharp as the current one.

23. THE RECOVERY

24. CHLOROQUINE
&
AZITHROMYCIN

25. HOW MARKETS BOTTOM

26. REALITIES
• The difference between a fast or a prolonged recovery in the stock market will
come down to three factors:
1. How quickly the virus is contained.
2. Whether businesses will have "access to enough capital and liquidity” to last the
90 to 180 days.
3. Whether fiscal stimulus can stabilize growth forecasts.
4. Volatility is almost certain to persist in the near term and the situation by the
numbers will get worse before it gets better. But, the uncertainty in the world
cannot change the fact that bull markets almost always last longer with moves
of far greater magnitude than the downside experienced.

27. THE FUTURE OPPORTUNITY
• It is important to note that
once the drawdown is larger
than -30%, the size of the
subsequent gains gets much
larger too.
• In other words, we are
approaching an area in
which further declines could
create a generational
opportunity for investors.

28. THE FUTURE OPPORTUNITY
• Once the markets bottom,
the opportunity is enormous.
• This market is eerily
similar to 1987

29. TIMING THE MARKET
TIMING THEMARKET

30. THE LONG GAME
1. Making portfolio adjustments amid severe volatility is almost
always a recipe for major mistakes.
2. If we’re coming out of a “true” low, then there are certain sectors
and factors that tend to lead. Looking at bottoms since 1928,
industrials and tech have a strong tendency to be out-performers in
the early stages of a recovery.

31. DISCIPLINE

32. DISCIPLINE

33. DELTA CAPITAL MANAGEMENT
407-422-2423
AEGIS WEALTH MANAGEMENT
407-831-3660
698 N MAITLAND AVENUE
MAITLAND, FL 32751
Sean Casterline, CFA
Alex Moore
Matt Haushalter