WTH!!!

 

By:  James C. Denton, CFP®, Managing Partner

March 9, 2020

 

This will probably be the briefest newsletter I have ever written.  There’s really not that much to be said.

 

It’s Monday morning, the market is tanking, and it looks as if before it’s all over we are going to be at least 20% below the record highs we set – are you ready for this? – about two weeks ago.  This will probably go down as the quickest bull to bear market in history.  So what to do?

 

The answer, and this probably will not surprise you, is “nothing”.  Stand pat.

 

The market right now is betting that this is the end of the world.  It may be right.  I certainly don’t think so, but what do I know?  And that’s the problem … nobody knows what the end game is for this disease.

 

But here’s the thing.  If it really is the end of the world, it will only happen once, there’s nothing you can do about it, and it won’t matter what you do.  If it isn’t, then this too shall pass.  And experience has taught us that you only lose money when you sell.

 

Here’s what I expect to happen.  This is actually only an experience-based guess, but I expect today to be as vicious as it has begun.  Tomorrow we will get a “sucker” bounce, followed by another big down day on Wednesday.  Eventually (it could come today, but probably won’t) the market will put in a bottom, and the recovery will begin.

 

The last few times we have been through a substantial correction (it’s been 9 years since we had a 20% drop but several of lesser magnitude more recently) we have seen rapid recoveries that were every bit as breath-taking as the downturn.  This is not going to happen this time.  This Coronavirus is the very definition of a “Black-swan event”.  An unexpected, unpredicted event with unknowable economic and even societal – almost certainly political – consequences.  The recovery will not be rapid. 

 

But recover we will.  And once again, I cite history as a calming factor.  Go back and look at your charts for 1987, 2000-2003 and 2007-2009.  If you sold you regretted it.  If you held on you came out ok.  And if you bought during those events, you’re a genius today.  The hit of the water-cooler crowd.

 

I said this will be brief, so I will not pontificate on how strong the economy is (or was, going into this … whatever it turns out to be …).  The media, being so wrapped up in reporting the scary stuff, isn’t giving any attention at all to the jobs report released on Friday.  The fact is the economy is in the best shape it has ever been.  This event is going to have an effect for sure, and may even bring on the recession that the negative crowd has been predicting.  That notwithstanding, right now, everyone who wants a job has one, and your investments are (1) probably worth more today than they were this time last year, and (2) probably will, if allowed to do so, recover very well as the virus runs its course.

 

There’s much more I could say, but it’s all been said before.  If you want to discuss further, I am happy to take your call.  Otherwise, just hang in there.  This too, shall pass.

 

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by LPL Financial. The material is for informational purposes only. All performance referenced is historical and is no guarantee of future results.

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.

This information is not intended to be investment advice for any individual.  You should consult with your personal investment advisor before making any decisions based on this material.