A rapidly changing world….
We hope you are all in good health and these market swings over the evolving virus headlines aren’t creating an excessive amount of stress for you. Over the past month, the Dow Industrials has closed more than 1,000 points lower on six occasions and has rebounded at least 1,000 points four times. What started out as daily swings of 3% has now become daily swings of 10%!
The problem that remains is uncertainty – nobody knows what this will look like in a couple of months, let alone next week – and markets HATE uncertainty. What we do know about uncertain times is that markets always price the worst-case scenario. When the actual data starts to become slightly clearer, markets respond positively with the same speed and vigor they had when reacting negatively to the uncertainty.
Headline driven events like this virus come out of nowhere. To me, this feels like a combination of two headline driven events (as opposed to economic driven events like the dot com bubble of 1999 or the financial crises of 2008) that I experienced early in my career. The first one was the tied Presidential election in 2000 which resulted in a market drop of 25% in five weeks – nobody likes not knowing who the leader of the free world is after a completed election. The second was 9/11 – just a shocking turn of events that shut the markets down for a week. Coronavirus has the chaos factor, the emotional impact, and the uncertainty of the future all rolled into one and we believe the markets have already priced a significant economic disruption into the markets.
But this too shall pass – it always does – both the headline events and the economic events will fade away over time. The seeds of the next bull market are being planted today and our single biggest job is to make sure you stay invested to reap the benefits. Folks, this is where investing gets hard! If it were easy, then everybody would always love the market and never invest in anything else. I always talk about staying consistent as the best strategy that produces investment results over time. It seems like trite and too simplistic advice, but now we all should be feeling how difficult that simple advice is.
The easy path is always to throw in the towel. Move out and wait as many investors are doing. Except the markets move all too quickly leaving folks out and waiting and undermining performance. If markets move further down, you won’t get in then because that means the headlines have gotten even worse and your nerves will be even more on edge. Your nerves will only calm down and allow you to make such a move once things have gotten better. Of course, the markets will lead the recovery as they always do and then you and your investments results will be left behind. Far too many studies on investor results versus market results over the years come to the same conclusion – investors who move their money in and out of the markets severely underperform over time.
Clearly given the current state of affairs and governmental recommendations, our client meeting scheduled for March 26 will have a different format than gathering in a ballroom. We are looking into different video and audio options that will allow us to still connect on that day with the latest information so stay tuned on that.
As for the office itself, we remain open. Our office design lends itself well to “social distancing” since we all have separate rooms and not shared cubicle space. We are wiping surfaces and door knobs down throughout the day and our daily staff meeting has been replaced with check ins by me at each individual room door. Some of you have switched to phone meetings which is a fine option as well, but we are also continuing with face to face meetings with our chairs pushed back a bit more than usual. Remember the tax filing deadline of April 15 still remains despite suggestions to the contrary. So that means that this tax season has less than 30 days left so if you haven’t gotten us your tax info yet, please do so as soon as possible. Don’t forget, you now have the option to upload your tax documents – just provide us your email and we will send you a secure link to do that.
As always, we are here to chat about the current environment so don’t hesitate to call us if you have any questions or concerns.