Coronavirus Market Update

 

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

May 7, 2020

 

During times of crisis it’s normal for humans to be fearful.  Our minds always go to the darkest places – we imagine the worst possible outcome, and we fear that’s where we are headed.  But think about it; how many crises have you actually experienced, and how many ended as badly as they could have?

 

The 9/11 terrorist attack is probably the worst experience during our lifetime.  It was a terrible event, but if you think about it, it could have been so much worse than it was.  More to the point, a year later, unless you lost a loved one, it was firmly in your rearview mirror.  It had very little if any lasting impact on your life.

Think about the financial crises we have experienced.  Some of us old-timers remember October, 1987.  More, but still very few actually experienced the dot-com crash of 2000 to 02, and more remember, experientially, the credit and banking crises of 2008-09.  There have also been a few fairly significant, but short-lived corrections along the way.  All of these events brought what seemed to be great carnage during their existence, but is there anyone reading this whose life was changed as a result of any of these events? 

Do you even know anyone whose life was changed by these events, changed permanently, for the worse?  If you do, take a minute or two right now and see if you can think back and parse a reason why their outcome was so much worse than yours.  If for most of us, no permanent damage was done, then can you determine what was different for the odd case where it was catastrophic?

The very few cases I personally observed were due to one of three reasons: (1) They were in critical financial condition going in; if you’re living on the ragged edge, you are (always) at risk of a short-term radical market event. (2) They thought they could handle it themselves rather than seeking professional assistance, or they had an inexperienced advisor who led them astray.  An experienced, qualified advisor brings an element of objectivity that very few of us have when dealing with our own money.  (3)  They panicked, sold when they should have been standing pat, took out more money than they needed and stashed it under their mattress, or even worse spent it or invested it irresponsibly.

I am not saying that if something bad happened to someone, it was their own damn fault.  That’s not my point at all.  What I’m saying is that all of us, while it was ongoing, had end-of-the-world fears, and even expectations, but ultimately it didn’t turn out nearly as badly as we feared.  The worst lasting impact these events had for most, perhaps all of us reading this newsletter, is that they forever shaped our expectations for every financial crisis we will ever face.  “It happened once; it’s inevitable it will happen again”.  I can’t tell you how many clients I have had over the years tell me, in the initial interview: “Job one:  Never again!”  We learn the fear, the feeling in our gut when we see our account values declining, and that we remember.  We don’t process and we don’t internalize the relief of the recovery or the good things that happen in the midst of the anxiety in the same way that we forever memorialize the emotions of the (short term) losses.

I’ve had eight substantive “what’s going on?” conversations with clients this week.  One said to me “saw my statement and it wasn’t as bad as I expected it to be”.  The other seven were variations on the opposite theme.  One thought he was doing much worse than he actually is (this probably describes most of you, by the way).  One asked me why I held on to certain investments which were doing poorly.  One wanted to know why I bought them in the first place.  All of them, however, were alike in the sense that they were much more focused on the investments which had lost money, and were not even aware of several which have actually done quite well.

So a couple of take aways:

• The crisis is probably not as bad as you think even now, and it’s not going to turn out as bad as the environmental noise (read that the press and the politicians) or your own psyche will lead you to believe (or fear).
• You personally, if you are my client, may be doing better than your average friend. I’ve discussed in previous writings some of the things we have done to manage our risk, and identify and take advantage of opportunities.  Won’t detail here, but just know that – so far, and tomorrow of course is another day – our accounts in the main are doing better than market averages would lead us to expect.

I would love to talk personally with every one of you but obviously that’s not possible, and there’s probably a few of you for whom it’s absolutely unnecessary.  But if you need to talk about what’s going on, need some personal feedback about your own portfolio, and a personal assessment about what life is going to look like (financially) on the other side of this thing, by all means, pick up the phone and let’s chat.

I said in my last newsletter, we at DFS see our primary role as to manage your money and to manage your expectations.  I need your help to do either: Your part in this is to keep me appraised of your situation, and just as importantly, your mental and emotional state. 

If you need to talk to me, the only way I’m going to know that is for you to let me know.  There is no shame in being a little apprehensive.  I get that way myself.  We are providing guidance for ~$77mm of other peoples’ money, and that brings a lot of responsibility that is more than a little bit intimidating.  I understand and to some degree I share your concerns, your anxiety, your fear.  More to the point, all of these emotions are normal, and even in some respect healthy so long as they are not debilitating – so long as they do not result in counter-productive behavior.

So to restate a message that appears in just about everything I have written or said to you over the years:  The corrections and the bear markets will come.  They are equally unpredictable and inevitable. And they also will pass.  They bring with them, opportunities which do not exist, or are at least a lot harder to identify during a bull market.  We bought Apple last week for a couple of folks at $250 per share.  I doubt we will ever get the chance to do that again.  And Johnson and Johnson has been absolutely phenomenal.  But it’s like the lottery … you gotta be in it to win it.

 

Stick with us; we’ll get you through this.  And if we need to talk, don’t be bashful.  Pick up the phone and let’s talk.

 

The opinions expressed 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.  Stock investing involves risk including loss of principal.