March 23, 2020 — We are in uncharted territory, that’s for sure. As one client told me this week, “I’m now more concerned about my health than my wealth.” It’s easy to feel anxiety about a multitude of things, and there is plenty to worry about now. On top of all of that, there are extreme weather warnings across the United States — tornados, blizzards, severe storms, higher-than-average temperatures in some places and lower-than-average in others. It’s a reminder that climate issues will still be with us, long after the COVID-19 has faded.
How can I help others? I have decided to institute a pro bono weekly Zoom call for anyone who has been impacted by the shutdowns, to give general financial advice and answer questions – Tuesdays at 4:30pm, starting tomorrow. I want to help any way I can. It’s what I do well and want to share my expertise. We will continue this for several weeks during this crisis, and then go to a quarterly call. Stay tuned and tune in.
So spread the word to anyone you know who is experiencing hardship or could just use some advice – have them email postoffice@bluesparkfinancial.com and to get the link to sign on. They can send questions or just log on to listen to others.
So what to do now? We at Blue Spark Financial are obviously not in the offices for in-person meetings but we are working, available by phone or Zoom video conference for all clients. Send us a message and we’ll schedule it!
The Fed is making unprecedented moves, including today’s announcement of another $600 Billion in Treasury and mortgage-back security purchases. That’s after lowering interest rates to near zero percent, and the previous $700 Billion in asset purchases last week. Economists say that GDP could decline by 50% in Q2 and unemployment reaching 30%. Those are dire forecasts and reflect the reality of #stayathome by millions of Americans. We need to ask ourselves whether this is the new status quo for decades, or will we return to normal-ish when the contagion is over? This drives our investing decisions, along with your own personal goals and plans.
There is again talk of a great transfer of wealth – from the panicked to the patient. Buying selling low when you don’t have to, you are locking in your losses. In general, bear markets caused by natural disasters or oil price wars are worked through in 15-20 months. There is no guarantee of course, but there is a pattern to crises and fear and human nature. Academic studies continually show the benefits of waiting out market crises. The basic truisms of “buying low and selling high” are hard to follow when you are in panic mode.
I think it’s fair to say that the bull run that started on March 9, 2009, is now over. It was an 11-year stretch with only a few corrections (September 2011 and December 2018.) For the last eight years, many pundits have been saying we were due for another correction or recession or bear market because stocks were “overvalued.” There have been multiple time periods in history where stocks stayed in overvalued territory for years — while the markets continued to climb. Imagine the returns you would have missed if you had sold then or tried to go “safe” with your whole portfolio. Your reinvested dividends and earnings continued on (despite the drop in value now, you have earned more and more shares). Many took increased withdrawals from your portfolios because of the good markets. Now that it has dramatically declined, many of you may be scared and may want to scale back. That’s what our “dynamic distribution” plan is based on – some increases when times are good and the ability to meet expenses but cut back if you feel the need when times are tough.
We likely will have months of volatility ahead, and we’ll be making trades to take advantage when appropriate for your situation. Let us know as soon as possible if you foresee any big changes to your life that would impact your current financial plan.
Remember, perception is not always reality. How we feel may not accurately reflect what’s actually happening in the economy or markets. Here are a few thoughts about bull and bear markets:
- Bull markets never feel like bull markets.
- Bear markets always feel like bear markets.
- Bubbles always feel like bull markets.
In the 2008 Financial Crisis, that inflection point was March 9, 2009. We all remember what happened then. This is different, of course, but there is no reason to think that the markets will go to nothing after the virus has run its course. And I believe we will see positive changes to come out of this crisis in the global economy, and among us as people, that will remain long after.
We need to keep this in mind: The world is not ending. Even though at times it may feel that way. We may indeed see a recession and definitely we’ll see reduced corporate earnings and reduced personal earnings for everyone. But humans are intrinsically hopeful and striving, and we will hit a point when the hope outweighs the fear in the markets. We just don’t know when that is.
Give us a call and let’s talk about it. And spread the word about my weekly financial literacy hour.
Give us a call and let’s talk about it. And spread the word about my weekly financial literacy hour.
Stay healthy and six feet away…
Warmest, Maura
