It is difficult to find a recent headline that doesn’t create some aspect of immediate fear and angst. The markets have shuttered, travel has essentially stopped and there is a constant reminder that a virus is spreading on a global level. I believe it’s the combination of the above as to why the anxiety levels have created a different mindset this time, compared with past corrections or bear markets. When local schools and coffee shops are empty, but no storm clouds are visible, it elevates the overall fear factor. We are committed to helping our clients make calm long-term decisions throughout the overall chaos, avoiding making mistakes under duress.
The Federal Reserve has recently cut rates to virtually zero and has pumped an unprecedented amount of liquidity into the banking system. This will not fully take effect until we are on the other side of this outbreak and begin recovery. There is no doubt that the economic impact will be damaging but the demand for a return to normal living standards will be strong as well. This has been an ‘event driven bear market’ and a swift one at that. We will have an ‘event driven recovery’ as well, the primary question is when that will occur. Instead of guessing or making seismic shifts in portfolio strategy, the need for balance is at a premium.
Once demand for everyday goods and services return, we could see a sustained move upward in capital markets with the same ferocity as we have felt on the downside. A prime example is our experience Friday, as gains erased a historic day of losses in minutes. At the time of writing this, the markets have reversed, and fear-based selling is back in control…that could change in minutes as well! Volatility will be the only thing that we can rely on being constant in the near term. Once the volatility does diminish, we want to make sure we don’t look back at emotional mistakes that damaged the financial road map for the long haul.
We can’t control the shutdown of our day to day normal, but we can control how we react to it on all levels. Our promise is to help navigate through the global financial chaos in a measured way. We will have a day when headlines read ‘Open’.
Click here to read Fed Is All In.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
All investing involves risk including loss of principal. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
The payment of dividends is not guaranteed. Companies may reduce or eliminate the payment of dividends at any given time.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.