We know this is a difficult time for our clients, we wanted to address a few things while we are navigating this health crisis. First and foremost, we hope all our clients are healthy and taking the proper precautions to take care of yourselves and your families.
Markets have come down off their highs into a bear market in a very short period. We want to let you know the most important thing to do right now is not panic. We are on top of our research and we will navigate through this for our clients. If you have any questions regarding your own account, please call the office – we are here, and we are working and will continue to be here for our clients so we can see you through this. I wanted to share a few notes on things we have been reading.
This from Peter Mallouk at Creative Planning:
“It’s not impossible to imagine this scenario: Every day for the next few weeks we hear of yet another city with a new ‘first’ COVID-19 carrier in the U.S., across Europe and around the globe. Eventually, that turns into thousands or tens of thousands of cases. Hundreds if not thousands of people die. People begin to cocoon, much like they did after 9/11, skipping their travel plans, athletic events, concerts, movies, restaurants and so on. Some cities even ban large gatherings. You start to see news reports from your local Wal-Mart or grocery store of barren shelves. People generally, well, they freak out. This would clearly have an impact on the earnings of all sorts of companies, from Chipotle to AMC theatres, from Ford to Delta and from Target to Nestle.
But here’s the thing. And, I might add, this is a BIG thing. It is, in fact, the only thing that should matter to an investor: This is going to pass. We are all not going to die.
It may pass in a few weeks; it may pass in a few months. No one knows for sure when it will pass. But it will. And when it does, the market will likely recover just as fast, if not faster, than it went down. We know exactly what modestly disrupting earnings is now. When that concern is addressed, however and whenever that may be, the market will likely turn swiftly.
Please note: This will not come with a proclamation. No one will announce that the market will start to rise because the concern has passed. The market will go up before then. The reason is that the market isn’t looking at what is happening today, but rather, it’s betting on what will happen tomorrow. It is not looking at current earnings, but at anticipated earnings. This is why market recoveries often involve a few false starts, especially when the market has perhaps guessed wrong.
Make no mistake. This is a classic correction that could turn into a textbook bear market. It has all the elements that indicate something may hurt earnings in the short run, but that something will likely be resolved in the long run. Frankly, timing this is for suckers. Those who try, more often than not, get burned.
Now, you may think you can outsmart this one. You’d get out or get more conservative NOW, and figure out a good time to get back in. But keep this in mind. Something like this is going to happen just about once a year, every year, for the rest of your life. That’s about how often corrections happen. They just occur for different reasons, whether it’s President Trump’s election, President Obama’s election, the downgrade of U.S. Treasuries, Brexit, a terrorist event like 9/11, the Greek Debt Crisis, Ebola or whatever.”
What are your odds of success if you try to navigate each one, or just a handful? If you are still pondering, let me answer for you: very, very poor odds. Even this specific scenario is likely to happen several more times in your lifetime. In 2003, SARS became the first coronavirus to cause severe diseases. It was followed by MERS in 2012 and now COVID-19 in 2020. As MRI Global reports, it’s sort of a new thing that is likely to happen again and again.”
This chart from JP Morgan showing the dangers of trying to time a bottom:
And finally, please see this attached link to First Trust on reasons to be positive about the US Coronavirus Fight.
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Regis R. Dillon, CFA, CFP®
Chief Investment Officer