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| April 01, 2020
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It is Week 2 of what I consider our national quarantine.  Only last week did most states, counties, and cities across America urge our citizens to stay-at-home, shelter-in-place, and social distance through governmental orders.  And, yet, it feels like at least a month if not longer due to earlier less stringent recommendations and the strain on our social psyches.  Who knew sitting on the couch in the comfort of our own homes would be so exhausting?!  But, it is – it really is exhausting.  I am no therapist, so, I will not venture to guess as to why, however, I am certain it has more to do with inner demons than outside influences.  Fear and anxiety brought on by uncertainty and disruption to our normal routines fuel our inner demons.

I commended to you two pieces by Capital Group last week discussing Bear Markets and How to Handle Market Declines.  You can find those in my original post here.  This week I recommend reading another piece from Capital Group – this time it comes out of their historical archives.  It is a letter written by Jim Fullerton, the former Capital Group Chairman, in 1974 during one of the worst bear markets in history.  His simple, yet bolstering message to his employees and Capital Group’s clients – “Courage!  We have been here before – and we’ve survived and prospered.”  He looked to the example of World War 2 and the global uncertainties, both economic and societal, the world faced at the beginning of April 1942 to give context to his own era of economic and societal uncertainties.  And now, at the beginning of April 2020, we can use both the period of 1973-1974 and April 1942 as context for our current era of economic and societal uncertainties.  There are so many gems in this letter that I cannot do it justice by paraphrase – so, read the letter here – however, I found this quotation particularly encouraging:

“What turned the market around in April of 1942?  Simply a return to reality. Simply a slow but growing recognition that despite all the bad news, despite all the gloomy outlook, the United States was going to survive, that strongly financed, well-managed U.S. corporations were going to survive also.”

The same will be true for us in the coming weeks and months. 

Already we are seeing glimmers of this with help from the federal government in the passage of the CARES Act last week which will help U.S. businesses, both large and small, with direct funding and tax relief to offset the loss of revenue due to virus mitigation efforts while encouraging these businesses to keep furloughed workers on the payrolls instead of initiating lay-offs.  It also helps American citizens most at risk of financial ruin due to any economic downturn with direct cash payments and expanded unemployment benefits while at the same time infusing cash into the national healthcare system to not only find a cure for COVID-19 but also to provide funding for hospitals and testing in order to expand care for the sick. 

Still, Fullerton’s words are pertinent because, after all, though we see that dawn is coming it is always darkest before.  It is dark this week, as I suspect it will be next week.  Courage is not the absence of fear but the resolve to stand and function amid it.  So, have courage!  We have been here before – and we’ve survived and prospered.

Financial Planning tips and ideas for having courage in today’s economic and market climate:

  • Have a Plan
    1. Prioritize financial needs and goals
    2. Develop a Family Budget – you can find a helpful worksheet here
    3. Establish an Emergency Fund with 3 – 6 months’ worth of living expenses in an interest-bearing, FDIC insured, liquid savings account. Obviously, this would ideally already have been established, but save as much as you can now in case of income disruption.
    4. Understand the process for CARES Act stimulus payments – and make a plan to use it to meet only the priorities set under “a.” above
    5. Negotiate with creditors – proactively contact your creditors to notify them of any late payments you expect and ask for deferment and/or renegotiate terms (this can include rent, mortgage payments, credit cards, medical bills, etc.) Again, prioritize your bills and payments.
    6. Research home loan options – refinancing your current mortgage, accessing a home equity line of credit, etc.
  • Focus on Long-Term Investment Strategy
    1. Rebalance your portfolio as opposed to making wholesale strategy changes or market-timing decisions
    2. Continue employer sponsored retirement contributions (i.e. 401k or 403b savings)
    3. Take advantage of better market valuations by investing cash for long-term investing goals in excess of your Emergency Fund requirement
  • Be Informed but Balanced
    1. Consume the news but in moderation
    2. Consider your news source(s) – there is a difference in validity, accuracy, and motivation between, say, the Wall Street Journal and
    3. Social Media generally is not a good source for accurate information – great entertainment value but fraught with misinformation
  • Small Business Owners – understand the provisions for government assistance available through the CARES Act

Investing in securities involves risk, including the potential loss of principal invested.

*  Past performance is not a guarantee of future results.

* Please note that rebalancing investments may cause investors to incur transaction costs and, when rebalancing a non-retirement account, taxable events will be created that may increase your tax liability. Rebalancing a portfolio cannot assure a profit or protect against a loss in any given market environment.

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