Right now, it seems most want to know what is going on with the markets....Should I sell now or should I ride this out...
Here is some perspective from a colleague that I wanted to share:
Shangri La
A remote beautiful imaginary place where life approaches perfection: utopia
A remote usually idyllic hideaway
Well, good bye to Market Shangri La. For now. 2017 was a banner year. 2018 was fine until the last quarter. The low point in the Markets that launched 2019 combined with the Fed’s about face toward lower rates led to another fantastic year. The Markets had been priced to perfection, as they say. It was Market Shangri La.
It was going to be something that brought us back to reality – to more normal investing volatility. When the move is as dramatic as this one has been, the cause is always something that wasn’t already on the radar. We know how Markets detest surprises. In this case, the novel coronavirus (2019-nCoV) cropped up from an open air market in Wuhan, China and has now begun to spread.
Fear about the virus is spreading more rampantly than the virus, including onto Wall Street as well as markets across the globe. Are they really worried about a global pandemic? We believe the answer is no. The Markets seem, at this point, most concerned about the economic impact of the precautions that governments, particularly in China, are taking to curtail the spread of 2019-nCoV. The precautions taken by governments as well as individuals, many of whom are cancelling travel plans, are creating havoc in the travel industry and disruption to manufacturing supply chains across the world. (Get your iPhone 11 while you can?![1]) In short, that is what the Markets are worried about.
There had been an expectation for low interest rates and moderate growth to continue. The disruptions to demand in several industries, in a few different regions change those expectations. As we know from past writings and experience, the Markets can’t stand uncertainty and are forecasting doom & gloom for the moment.
As always, we take our lumps in investing – the good with the bad, as they say. It’s not usually as dramatic as all this – with the S&P 500 down nearly 13% for a week as of this writing, but then, neither are the gains usually as incredible as those we experienced in 2017 & 2019. Suffice it to say, there has been great upside the past two years and while none of us like to give back, even on a temporary basis, that is, unfailingly, the way the Markets work.
You’ve all heard it before and the tune has not changed: stay the course. If your objectives have not changed, your best chances of recovery and continued growth is to stay invested. The graphic below is a great visual representation from JP Morgan showing the impact of missing just a few days of a Market rebound. Sometimes panic selling in the Markets induces panic in investors, even those who have been at this a long time. It’s important to note the blue text in the image below, “Six of the ten best days occurred within two weeks of the ten worst days”. This demonstrates why staying in it for the long haul is so critical to long term investment success. The strongest rebound days often occur in close proximity to the worst days. Stay the course…
Last but not least, thanks to Dr. Chang’s office, we leave you with a few thoughts around novel corona virus, particularly as it compares to the flu in the United States.[2] As of February 28th, there are 78,630 confirmed cases in China. There are 53 confirmed cases in the U.S. There have been 2,747 deaths in China related to corona virus. There have been zero deaths in the U.S. related to the same. On the other hand… the CDC estimates that, as of February 15th, there have been 29,000,000 cases of the flu with 280,000 hospitalizations and 16,000 deaths.
The foremost doctor’s order to stay healthy: get your flu shot.
The CDC has a plethora of resources and updates available. The World Health Organization is also offering updates as is the California Department of Health.
We close with our usual reminder, portfolios are positioned to weather these ups and downs. It’s not fun but it’s expected. We continue to maintain close communication with our investment managers and monitor performance. If something has changed in your situation, please do reach out to us. If you have concerns, please do not hesitate to be in touch.
Written by: Alisa Chatham Sakowitz
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[1]https://www.bloomberg.com/news/articles/2020-01-28/apple-supply-chain-braces-for-disruption-from-coronavirus
[2] Dr. Bayard Chang’s office & CDC.
Photo by Aarón Blanco Tejedor on Unsplash