Hi everyone,
I honestly love my job. I love learning the backstory behind how you earn your wealth and being a part of the narrative in helping you reach your financial goals. I enjoy the challenge of trying to stay on top of world markets and geopolitics. But boy, it is times like these that also remind me of why I went gray so early!
Markets are in fear mode right now amidst the Corona Virus concerns that are gripping the world. Realistically, we are dealing with a complete unknown in terms of trying to gage the scope and length of a pandemic on the world economy. There are lots of guesses out there, but really that’s all they are – guesses. Some guesses are more educated than others but be very wary of the zealot – anyone out there who is speaking with conviction and confidence on what is going to happen short term is not someone we should be trusting! We don’t have an exact match or rhyme to what’s currently happening with markets, which is why we need to be careful short term, but we do have plenty of experience with the pattern or rhythm of long term market volatility.
Corrections and Bear Markets are a normal part of investing. The last thing you want to do is make an emotional decision in terms of trying to go more defensive in a fear driven market. You have to be right twice when stuffing your money under a mattress – when to get out, and when to get back in. Timing the market is difficult at the best of times, being right twice in an emotional market is pretty much impossible!
The ability to make decisions rationally is the hallmark of a good investor. While I certainly didn’t see a pandemic coming, the good news is that there were geopolitical concerns that were worrying to me last year, so we took profits and moved some assets more defensively in anticipation of a correction. This was the discipline side of investing applied in rising markets, now we must apply that same discipline when markets are falling. There are companies out there that I liked two weeks ago that are now trading at prices I like even more. If things continue to escalate, the Corona Virus could push us into a global recession. That would hurt, but it really isn’t the end of the world or of free market economies. We’ve been there many times in the past.
On average, you are looking at 18 months for markets to recover from a full blown bear market/recession scenario (which happen fairly regularly for many different reasons, Corona is a new catalyst, but not a paradigm changer). If things unexpectedly improve (vaccine, virus contained quicker than expected, not as big an economic impact as predicted etc…) and this turns out to be just a correction and not a recession, then things will bounce back fast. It is these times of uncertainty and fear that offer great opportunity for the rational and brave investor to put new funds into long term investments. Nobody knows what will happen short term, those that think they do leave themselves very vulnerable to the emotional volatility of markets, but for the patient investor willing to play a longer game, I’m confident that there are deals to be had. Strategically going forward, if things worsen over the next couple of quarters, I will gradually move your existing monies that have held up well during the crash into distressed assets.
I have also included a couple of market commentaries, one technical piece and one more general in nature, that I found helpful myself for you to look at.
As always, I will be happy to talk with you regarding any questions or concerns, or if you would like to discuss this in more detail don’t hesitate to contact me.
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