In The Midst of Such Uncertainty

Waking up Monday morning was hard enough after switching to Daylight Savings time. Then to see the Dow Jones Industrial Average down over 2,000 points, or 7.78%¹, was certainly a punch in the gut. It hurts, even for us who constantly preach about taking the emotion out of investing and keeping your eyes on the long-term. That being said, history suggests that the pain will be temporary. Looking back over a century, the globe has experienced world wars, recessions, oil shocks, and epidemics – all of which made it feel like the world was coming to an end. Yet so far, the stock market has recovered and continued onward to new highs. Clients also take heart in the fact that their investment portfolios contain investments like fixed income and cash, and not everything is in the stock market.

There is no doubt that this novel coronavirus “COVID-19” has brought about an abundance of uncertainty, hence the large swings up and down in the stock markets over the past three weeks. On one hand, it may take many months to develop a vaccine and contain the spread of illness. If businesses start to shut down and consumers stop spending, this could have a substantial impact on corporate earnings in the near-term. Looking through a rosier lens, however, the recent sell-off appears to be pricing in a lot of the potential downside, creating good value for long-term investors. Looking at the economic backdrop: borrowing costs are around all-time lows, oil is extremely cheap, and consumer confidence is strong. All of these factors lend to great bounce back potential when the virus worry is behind us.

While the market volatility can be unnerving, we want to remind you that these downturns happen from time to time and are normal. If you are interested in the history of corrections, we have a lot of historical information to pass along – just let us know. Keep in mind that the media doesn’t necessarily want you to remain calm and carry on. Television shows, phone Apps, and newspapers earn a living by selling advertising and anxiety keeps us coming back for more. Mark Twain once said, “If you don’t read the newspaper you are uninformed; if you do read the newspaper you are misinformed.” While it important to be aware of the world’s issues, don’t let the headlines lead to hysteria in your life.

Warren Buffett published what is now viewed as an iconic message to Americans back in his 2008 article, “Buy America. I Am.” The letter came at during some of the darkest hours of the 2008 financial crisis and feels extremely relevant today. The message was simple: “I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month, or a year, from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over.” We highly recommend the read for some much welcome perspective.

The most important thing today is your health and that of your loved ones. Wash your hands and avoid contact with those who are sick. Yes, “social distancing” is going to become a household word. It is entirely natural to wonder, and worry, about how life at work, school and home will be different, and for how long? As things continue to unfold in the coming weeks, keep in mind that our team is always here to help. If you would like to talk about your financial life, please reach out to us any time.

¹TheStreet