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Over 16M Americans have filed for unemployment since coronavirus outbreak

EventShares Chief Investment Officer Ben Phillips joins Yahoo Finance’s Seana Smith to discuss weekly jobless claims jumping to 6.6 million, bringing the total number of Americans filing for unemployment aid to over 16 million in the past three weeks.

Video Transcript

SEANA SMITH: For more on this, I want to bring in Ben Phillips, EventShares chief investment officer. And, Ben, we were just listening to Brian bring us the latest of what Jerome Powell was saying this morning. The one thing that stood out to me was the fact that he was saying that the Fed will act, quote, "until confident that the economy has weathered the storm and is on track to achieve our maximum employment and price stability goals." When we talk about what this means for the broader markets, how is the investment community thinking about the Fed's actions today?

BEN PHILLIPS: Well, I think-- I woke up and I was surprised just at the number myself. You know, I know I was going back and saying, has the Fed ever done anything like this? And you mentioned, it's unprecedented. We've never seen the Fed directly address really small and medium-sized businesses like this. So this is unprecedented. This is historic what they're doing. The reason is we've had 16,000-- or 16 million, I'm sorry-- job losses in the past three weeks, right, since this started spiking. That's 2/3 of the jobs created over the past 10 years since the GFC. So it's a big number. The Fed has to step in. Congress has to step in. And we're seeing it in big numbers quickly.

SEANA SMITH: Ben, I want to go off that $16 million number that you just read. Do you think that the monetary policy that we're seeing-- is it enough-- are we seeing enough come out of the Fed, given the huge number of job losses that we've seen over the last three weeks?

BEN PHILLIPS: I think what the Fed has done is substantial. I mean, they have come out with-- everyone's using multiple kitchen sinks, right? That's the market and colloquialism. It's been a huge number. It's tough to say, right? Because if you look at what coronavirus is doing, what the shutdown, really, is doing, every week that we're closed in the US is almost a 1% GDP drag. That's just if you kind of put it all together and try to ballpark it-- but a 1% drag on GDP from each week that we're closed. That's a massive number. And so there has to be massive efforts from liquidity, from the Fed, from stimulus that really helps support the economy in this very tough time.

SEANA SMITH: When we try to gauge just the extent of the destruction that the coronavirus will cause, it's obviously very tough to try to put a number on it right now. But when it comes to the labor market, it doesn't really seem like there are any signs of this slowing down any time soon. How much worse do you think it could get from here?

BEN PHILLIPS: Well, I think it is going to get a little bit worse, but I think we're encouraged by some of the numbers we're seeing nationally. So if you look at-- California, for example, looks like they might have dodged the bullet largely, some other large states too. So we'll see, you know, how quickly, you know, this thing continues to spread. But New York, obviously-- I have lots of friends there, used to live there for over a decade-- our heart goes out. That's the hardest hit area in the US, and that's an understatement.

But you know, I think if you look at the US as a whole, there's the potential we're going to start opening up areas of the economy and letting people go back to work and start to function more normally in early May. So I'm encouraged. This is going to be a big GDP drag. Everyone's trying to figure out-- the key question is how long does this last? How many weeks are we closed on a national basis? But for us, we're getting a little more constructive seeing some numbers-- you know, some proactive numbers, I guess more encouraging numbers lately.

SEANA SMITH: Ben, what do you do in this environment? What looks attractive to you and how are you identifying those buying opportunities right now?

BEN PHILLIPS: Yeah. So you know that we're investing in policy themes, right? So we're looking for long term changes in, really, policy. So what's going on right now is, like you mentioned, this unprecedented type policy action. It's not directly affecting our themes. What it is, it's more addressed to the entire market. But you know, themes we're looking at-- sports betting is taking a huge whack, right? You know, people are saying we're never going to go to a casino again-- a lot of sports betting names have casino leverage there. So that's something we're looking at. We think that's an interesting opportunity.

This energy-- energy was already in the doldrums. It was totally beaten down. And now with a potential macro slowdown on a global basis, as you were just talking about, oil prices are, you know, at long term lows right now. So we're looking at some energy names. There's IMO 2020. That's a policy theme that we still like and actually use this energy weakness as an opportunity. So we like adding to something like that.

You know, 5G telecom-- these themes-- infrastructure is one we've liked for a long time, because states are spending, but now we're going to see a federal package most likely. So that's just another catalyst for the infrastructure names. So you just have to be nimble. You have to get out of the names that maybe are holding in that are fairly valued and get into some ones that are deeply discounted. So we're nimble, we're being active, and I think everyone should think for the long term here.

SEANA SMITH: Hey, Ben, when you are positioning yourself right now, what are you saying, or what is your gauge just in terms of when you expect the economy to recover? And what do you think that recovery will look like? Do you think it will be what we've heard time and time again, it seems like, over the last couple of weeks that it most likely will be a v-shaped recovery?

BEN PHILLIPS: Yeah, you know, the debate's still out there, right? And I think what really matters is how much does this impact confidence? How much does this impact the consumer? Consumer spending is clearly taking a hit right now. I mean, we're seeing certain goods that you can ship to your house, you know, picking up, we're seeing groceries pick up. But really, overall, if you have 16 million people losing their jobs in three weeks, that does not bode well for future consumer spending.

So I think Q2 is really just going to be, hopefully, a wash. We're going to say, you know, it's going to be a very negative GDP number. That's a foregone conclusion. But if we can get Q3 people back to work and clicking, this could be a shorter-- you know, a shorter recession. And we've talked about-- I posted something on LinkedIn even-- that when there's an event-driven recession, it's usually-- it's the shortest version. It's usually nine months long on average. So that was a little encouraging to us too. When there's this shock that's so out of left field, it tends to be a shorter lived recession. So we're also encouraged by that.

SEANA SMITH: All right, Ben Phillips of EventShares-- chief investment officer there-- thanks so much for joining me this afternoon.

BEN PHILLIPS: Thanks.