Reason in a Sea of Hysteria
Updated: Mar 26
Dear Clients, Colleagues and Business Partners,
I feel compelled to write to you today to update you and provide some calm in a sea of hysteria.
The COVID-19 virus is a formidable foe, to be sure. It is however not a guaranteed death sentence. Most people will recover if they contract the virus. The # 1 Priority is for all of us to keep ourselves and our families safe.
To that end please heed the recommendation of Federal, State and Local authorities to follow social distancing procedures, put in place, and evolving all the time. It has become very clear that social distancing will lessen the strain on our health care system. This is vital right now. If possible, work from home!
We have learnt many lessons from China, South Korea and Italy, and that is that the rate of infection peaks and slows down anywhere from 4 weeks to 12 weeks after it spreads through communities. China today is getting more people back to work every day.
What makes this particularly unnerving is the that this did not start as a financial crisis, and the market declines have been particularly rapid. We hit a new all time high on February 19th. While the decline has been large and fast, the S & P 500 is still not yet below its December 2018 low!
While the short-term outlook for corporations is lower profits or even losses. Longer term outlook for most business will not really change.
We will likely go into a recession, given normal behavior is no longer normal. We are not socializing, frequenting restaurants, attending conferences, going on vacation, or making large discretionary purchases. That slows down the economy. It is important to note the Administration, Congress and the Federal Reserve are taking steps to ensure that financial markets are liquid, even though they are particularly volatile. Steps are being taken to ensure that those unable to work will be supported by Federal programs put in place. For investors this is a market that is providing a unique entry point with stocks down significantly, from last month’s all-time highs. The key is whatever you do, DO NOT SELL! With the liquidity, and low interest rates, this market will turn, before the good news hits the wires or the evening news. When that happens the voracity of the turn is generally so strong, that those on the sidelines, do not have the opportunity or emotional conviction to get in and participate. This fact causes most investors to underperform the market. Market timing is a strategy built on L.U.C.K. and we believe that your futures are too important to base on LUCK!
This will pass, we will emerge stronger and this will again force most market participants to reassess their risk tolerances, as they did after 2000 – 2002, and 2008.
We remain here to serve you and answer any questions or concerns you may have.
David J. Shill CFP® AIF®
Partner - Wealth Management