A Respite from the Capital Market

March 26, 2020

 As of this writing, stocks have gained 16% over the past three days. The headlines in the financial press this morning focused on the stock market.  For many of our clients, there was even more good news that was barely reported by financial writers. Over the past week, the values of investment grade corporate bonds have risen by 17%. For perspective, the second largest weekly rise in the past 20 years was 8%.  The gains in both stocks and corporate bonds provide a very welcome respite from the mounting losses over the past few weeks.

We do want to offer some thoughts of short-term caution and long-term optimism to provide some perspective on what’s been happening with your portfolio.
 

In the Near Term

 

To begin, we’ll state the obvious.  While financial markets have been partially rebounding, the health care issues and short-term economic problems will continue.  Even if social distancing is flattening the curve, it’s not eliminating the curve, and there will be an increasing number of sick people.  Unemployment will continue to rise -- the government aid package will reduce, but not eliminate, many Americans’ economic hardships.  While it’s our job to focus on investment values because we’re investment advisors, we don’t live in a bubble.

 

Secondly, stock market volatility is still enormous.  The same economic uncertainty that led to stock prices increasing by 5% this morning can cause declines of that much and more.  Fund managers are continually analyzing the economic and corporate data, and then analyzing the analysis of that data.  The truth is no one, including us, can tell you what stock prices will be tomorrow or what returns will be over the next week or month.  We’ve said it before, and we’ll say it again – during a crisis like this, anyone who tells you they know what short-term returns will be is lying.
 

In the Long Term

 

Our outlook for the long-term has not changed.  There will be a point – perhaps in September of this year, perhaps as long as year-end 2021– when the health crisis will be behind us.  The economy will be in recovery, and a great number of the employees who have been furloughed or laid off will resume working.  Markets focus on the future, and stock prices will reflect that growth outlook.  It’s for that reason, and not because of predictions in the near term, that we believe you shouldn’t alter your investment strategy.

 

Our Access as Savant

 

Our employees have been sheltering in place for two weeks. While this does present some challenges for many of us, we’ve been able to respond to all our clients’ concerns and needs on a timely basis. Yes, we’re busy, but you shouldn’t hesitate to contact us if you have questions. Fortunately, all of us are healthy, and our employees know their jobs are secure. We have a company meeting by phone three times a week to stay connected and share thoughts on how we can better serve our clients.

 

Future Commentaries

 

We try to balance keeping you informed against pestering you with information.  Personally, my email inbox, which was not lonely before, has increased three-fold in activity.  Hence, for the next few weeks we will be “quiet posting.”  While we have new commentaries here on our website, we won’t be sending emails announcing those posts.  Please check back for updates.  And to be repetitive, you can always contact us for additional information.

 

Please stay safe.

 

 

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