We hope our clients are all healthy and are being safe. We want to thank all of our clients that are nurses and doctors and front-line workers who are doing everything they can in the face of this pandemic. Our pilots and crewmembers – I know it is a tough time, be safe and take the proper precautions.
The headlines will continue to be scary for the foreseeable future. As more people are being tested, there will inevitability be more cases reported and there will come a point where we all know someone who is a friend or family member that has this virus. Economic numbers will be very bad as the economy slows because we are all taking precautions and staying home. This will be necessary to get through this virus. This is the fastest bear market we have seen. Ben Carlson, of A Wealth of Common Sense, put together this chart of the other 12 bear markets we have seen and their ensuing one, three and five year forward returns:
We don’t know exactly when this will end but past bear markets and market downturns all have one thing in common- they end.
Josh Brown, of Ritholtz Wealth Management, had some good thoughts on trying to get in and out during these times:
“Why don’t we just sell everything and wait this out? Get back in when the dust settles?” This is the question every financial advisor is getting this week, from at least one or two clients. They’re asking out of genuine curiosity, not just panic or fear. And it’s a great question. The great answer is that you won’t know when the dust settles. There’s no airplane writing the “all clear” in the sky above your neighborhood. And when the dust settles, do you think stocks will be at their lows? Or will they have already rallied furiously, in anticipation of this? Let me give you an example. Today is March 9th. Precisely eleven years ago today, in 2009, the stock market stopped going down. There was no reason. The dust had settled, without fanfare or any sort of official announcement. If you had polled people that day, or week or even month, most would not have agreed that we had seen the worst. The economic headlines were not improving. But there it was. And by June 1st, less than 3 months later, the stock market had climbed 41% from that March low. And even with that having happened, the majority of participants still weren’t clear that the dust had fully settled. That we had, in fact, seen the worst. There were still people calling us 3, 5 and 7 years later who had gone to cash and still hadn’t gotten back into stocks. They missed a new record-high a few years later and hundreds of percentage points in compounding on their assets.
All-in or all-out are terrible strategies. You cannot afford to miss the 25 best days in the market, or your returns are wiped out and you may as well have simply sat in 5-year Treasurys. The catch is that the 25 best days are frequently clustered among the 25 worst days. You can’t have the up without the down. Anyone promising you otherwise is either uninformed or a liar. I have often observed that it’s usually some combination of the two. In October of 2011, we were in the midst of the European Debt Crisis and stocks were rising and falling by 2 and 3% every day. Volatility was off the charts. I wrote about the stupidity of being all-in or all-out nine years ago, in the middle of that storm, and every word of it still rings true right now.”
We have survived these events before from World Wars, inflations, deflation, 9/11 and many other events. While it is painful, history has shown us that patient and disciplined investors will be rewarded over the long term.
For our clients, interest rates have come down. You may find it helpful to look into refinancing any debts with higher interest rates. Again, I want to reiterate we are here at the office working. If we must work from home, there will be no interruptions in our service to you and we have prepared for such a scenario.
The information contained herein was obtained from sources considered reliable. However, its accuracy or completeness cannot be guaranteed. Neither the information nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.
La Ferla Group does not provide legal or tax advice. You must consult with your legal or tax advisor regarding your personal circumstances.
Contact La Ferla Group if you have any questions; if your financial situation, individual needs or investment objectives have changed; or if you would like to impose or change any investment restrictions on your account(s).
La Ferla Group LLC (“La Ferla Group”) is a federally registered investment adviser with its principal place of business in the State of New York. Registration does not imply a certain level of skill or training. This brochure is limited to the dissemination of general information pertaining to its investment advisory and management services. For information pertaining to the registration status of La Ferla Group, please contact La Ferla Group or refer to the Investment Adviser Public Disclosure web site (www.adviserinfo.sec.gov). FOR ADDITIONAL INFORMATION ABOUT LA FERLA GROUP, INCLUDING FEES AND SERVICES, SEND FOR OUR DISCLOSURE BROCHURE AS SET FORTH ON FORM ADV FROM LA FERLA GROUP USING THE CONTACT INFORMATION HEREIN. PLEASE READ THE DISCLOSURE BROCHURE CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
Regis R. Dillon, CFA, CFP®
Chief Investment Officer