Greetings,
More than ever in these stressful times I am hoping you and your family are well. It is crazy how much more real a “global” event feels when it starts to impact us locally. We heard the words “global pandemic”, saw what’s happening in China and Italy and the reaction in stock markets and yet it feels so much more threatening or genuine when our own lives become directly impacted. There is an old investor psychology line that helps us understand, in part, our reaction to today’s situation: “A recession is when my neighbor loses her job, a depression is when I lose my job.” Much harder to keep an objective perspective and think clearly about things when you are right amid the crisis. These are trying times on so many levels and I can only reassure you that I understand how stressful it can be and empathize with you. I have been very appreciative of all of you who have reached out to me to see how I am doing. So thankful for your thoughtfulness!
I am calling this a market update, but in fact there is not much new to report from my last email. Markets are gripped in uncertainty and fear right now as we wait to see the scope and scale of the corona virus itself on populations, then try and gauge the impact on the economy. This volatility is going to continue short term as there is no one out there thinking we have seen a virus peak yet in North America. I have obviously been reading as much as I can on market prognostications and “guesses” on where things are going. Goldman Sachs has one of the more sophisticated modeling programs out there and their most likely scenario is that the virus takes another quarter or two to run its course on the population, economy starts to return to capacity in the third/fourth quarter of this year and we start to see a return to normal by the end of fourth quarter/first quarter next year. That passes my “smell test” in terms of what makes sense to me in trying to look at things from a common sense, objective standpoint rather than either getting bogged down in technical data or reacting emotionally to current headlines and happenings. China seems to be over the hump in terms of spread rate and is already reporting an uptick in staffing levels and production. Western markets are likely to follow a similar pattern and the economy will reaccelerate when (not if!) the crisis passes, and it takes advantage of global stimulus packages taking effect.
Important to remember markets are always looking ahead. Right now they are in the midst of trying to price in a full blown, pandemic initiated, global recession. When we are in recession territory they will be looking ahead and begin to price in the recovery. We won’t know where the bottom was until we look in the rearview mirror, but when we have a long-term perspective that bottom is irrelevant as we are not selling our securities when things are down. We can lament the drop in value of our portfolios, but we don’t lose anything unless we sell at a loss and your portfolio is specifically structured so that we won’t have to do that! We want to be buyers when things go on sale and we don’t want to gamble on trying to wait or identify the exact best moment to do so as I just don’t know of any reliable method of timing markets. We just want to know we are getting value, and right now there is value aplenty! Stressful times make for simple advice from me. Stay the course, buy as much as you can now while there is uncertainty and fear and discounts on good companies. Warren Buffet just made a huge purchase into airline stocks last week and then watched the sector drop even further. Not an investment for the faint of heart for sure, but he doesn’t care what happens short term, he knows that this will pay off in spades in years to come.
Carissa, Chelsea and I are all working remotely until the peak spread risk is over. You can still reach us by phone or email anytime. If we haven’t already done so, I hope to schedule a call with all of you in the coming weeks to discuss an action plan specific to both your circumstances and individual portfolio. We will be contacting you all by email to try and arrange the best time to connect but as always don’t hesitate to reach out to us if you have questions on anything!
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