Wednesday, March 18, 2020
Dear Client Family and Friends,
I never cared much for Space Mountain at Disney. My stomach lining was more agreeable with Thunder Mountain. The Whipsawing (similar to Space Mountain) we have experienced in the market of late is very uncomfortable. I get that. We all know that we should never sell at the bottom or buy at the top, but that is exactly what fear will lead us to do, so I want to encourage you to not be discouraged, to stay calm, and not make decisions that you may come to regret later.
We are all asking a lot of questions. How long is this going to last? Can the market go down from here? What should we do? Are we going to be ok? Will there be a recession? Are we in a bear market?
I don’t know the answers to all those questions. But I can share some of what I’ve been hearing from analysts and money managers in the past few days.
According to Phil Blancato, CEO of Ladenburg Thalmann Asset Management, Monday we officially entered Bear Market territory. A recession could be coming in the 2nd quarter. More likely it will look like a recession, but things will probably come back quickly.
According to Brian Salerno, CFA, Senior Portfolio Manager of City National Rochdale, we may see a quick but deep recession. It will be painful for three to six months, but likely there will be a rapid recovery. And yes, the market could drop more before it begins its recovery - a good reason to have cash set aside for income needs, and to keep the rest of the portfolio invested. Something Brian said that I liked, “for the first time in a long time, the country is valuing life over money.”
According to Robert C. Doll, CFA, Senior Portfolio Manager and Chief Equity Strategist at Nuveen, last Friday, we are probably at the beginning of the bottoming process. He felt that the 2nd quarter would certainly be negative GDP growth, but in 3rd and 4th quarters GDP growth would probably be positive. He was quick to point out that the “market bottom” is not an event, it is a process. The process is usually a “Shock and Awe” low, followed by a rally, and then a retest. In the retest, the market will go down with a whimper, and then it is usually the time to buy.
Also consider that, historically, bear markets have come and gone. In other words, they happened and we recovered. They are a normal part of the permanent historical uptrend. Granted, they are unpredictable, but should be expected and embraced by disciplined long-term investors. As the old saying goes. It is time in the market, not timing the market. It is the reason for having an asset allocation that is appropriate for your risk tolerance, your timeframe, and your goals.
I don’t know how many calls I have had during the past few years asking to “invest” emergency fund money because interest rates were so low. My answer is always a resounding “NO!”. Even if your emergency fund money is earning zero, it needs to be there if you have an emergency. If you invest that money and the market drops and then you need it for an emergency – like being unable to work due to a Covid-19 quarantine, it is no longer available. The money that is for long term can be invested appropriately, considering how long “long term” is and what your risk tolerance and goals are.
There is never a bad time evaluate your portfolio to see if you are in the right place for where you are in your life.
What we do NOT know:
- How long this will last or when the markets will recover
- When the next 30% gain or 30% decline will commence
What we do know:
- The economy had been showing tremendous strength before this current panic.
- No person, investment adviser or government can consistently predict the future.
- The vast majority of mankind has a massive internal motivation to innovate, grow, work and succeed.
- Good times in this world come and go, but the spirit of the human soul continues.
- The past never guarantees the future.
What should you do?
- If you have been implementing the comprehensive financial planning principles we have historically, currently and continually advocate, our advice is to do exactly what you were doing BEFORE this current panic showed up
- If you need cash, let us know and we will get you what you need
- If your long-term financial goals have not changed, we do not recommend changing your portfolio (from our perspective, the word “portfolio” includes the entirety of your financial resources: all accounts and products you own).
- If you have some additional cash, we should talk about deploying it along in here
- If you find yourself home more than usual because of “social distancing”, shut off your electronic devices, spend time in real conversation with your family. Cook as a family. Make up some silly games and have family “Olympics”. Do devotions as a family. Make some memories.
- If you live alone, “partner” with someone else who lives alone with a commitment to check on each other frequently with a phone call or a text. A phone call is better, because it does a heart good to hear the sound of another human besides the voice that comes from your TV set.
- Don’t hoard.
- Don’t spend hours fixated on the news. Limit your time on the TV. If you miss the evening news – trust me – they will be covering the same thing first thing the next morning.
- Live with hope and faith and gratitude. Living with an attitude of gratitude will go along way in keeping you healthy.
- Laugh. A good belly laugh is great for reducing stress.
- Remember, this too shall pass. We will get through this.
If you have questions or concerns, PLEASE call me – 954-983-5600 Ext. 119, or text me – 954-880-3410. My assistant, Danielle, can be reached at Ext. 154. We are working remotely more these days because of “social distancing”. Temporarily we have halted face to face client meetings (my favorite way to interact with you) to protect you and your families and us and our families. I can set up a zoom meeting so we can be “face-to-face” from wherever we are. If we don’t pick up your call, please leave a message. We promise to return your call as soon as possible.
Praying for your good health.