Treat this as an opportunity rather than a crisis

Hi Everyone,

Hope everyone is healthy and safe.  If this social isolation has confirmed anything for me, it is that I am definitely an introvert.  Staying home, being with family, lots of time to read, with the odd hike or mountain bike ride on the local trails on our mountains is not a burden for me at all!  So far I am resisting the pressure to go to “zoom” meetings as I quite like being able to talk to all of you from my home office in the comfort of my sweats! If there wasn’t a global pandemic going on, I would be pretty happy right now!

In my market updates of the last couple weeks, I was urging calm in the face of unprecedented drops in markets as the fear and uncertainty of covid 19 played havoc on stocks.  This week continued to be unbelievably volatile, but this time I am not simply using the word “volatile” as a euphemism for “crash” as markets rebounded back up almost 20% off their bottoms of the year.  This came on the back of the Fed announcing massive aid and stimulus packages in the US.  They are largely following the “play book” that was developed in 2008/2009, along with some more immediate relief measures for those losing their incomes as a result of the virus.  This “play book” stimulus package  proved to be effective in revving up the economy ten years ago, and while I am not convinced it is exactly what is needed now in terms of most efficient use of assets, I have no doubt that it will eventually have a similar effect on the current economy once the corona virus is contained.

Markets are not rational in the short term.  It is why it is so hard to time tops and bottoms.  Just like it makes no sense to me that they would drop over  40% on the back of an event driven temporary disruption to the economy, it also makes no sense to me that they would come roaring back before we actually know the full extent of the problem.  We are not really close yet to hitting peak contagion in North America with some pretty well-respected doctors predicting deaths in the hundreds of thousands before the virus passes.  While China seems to be coming out of it now, that is a four-month window that it took for them to “flatten the curve”.  Things will get worse here before they get better and that will wear on markets.  The one-two punch of a global pandemic and an oil war was not solved last week. 

Expect markets to continue to be volatile and I would be very surprised if we don’t retest those bottoms before we start a legitimate recovery.  While nobody knows where they are going short term, I do know that markets continue to offer tremendous value and opportunity now and where they go in the next six months is completely irrelevant to all but the very shortest-term investor. There is a saying parents can relate to that I think applies just as much to investing as it does to raising kids – “The days are long, but the years are short”.  You will go very quickly from long, emotional, stressful days that you thought might break you, to looking at your kids (investment portfolio!) and wondering where the time went and how it is they grew up so fast. Be brave through these volatile times, stay the course and invest more where you can.  Treat this as an opportunity rather than a crisis with regards to your portfolios and you will be a very happy investor in a couple of years!

Stay safe, and try and find and appreciate the good in what are fearful and trying times!
Jeremy

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