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Let's Not Get Ahead of Ourselves

Let's Not Get Ahead of Ourselves

| April 09, 2020
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Up to now, my communications have been with the general purpose of offering encouragement in the face of bad, sometimes frightening, news.  It seems this week I am tasked with a different job – providing balance and restraint to the relief felt as investors and savers have witnessed a significant rebound in their portfolios over the past 10 days.  We have had multiple days in a row of market gains, and man, it feels good!  In fact, the market – presented as the S&P 500 index – is up roughly 27% from the market lows seen last Monday, March 23rd.  Good news for sure, but, here is my caution:  it probably will not last.

Sorry to be such a Debbie Downer, but the reality is that our economy and the greater global economy is going to struggle for a time to get its engine back up and running.  The impact on companies’ abilities to revive earnings, let alone profits, is going to be dire for a time while governments around the world test lifting quarantines and try to coordinate economic policy that will communicate to the consumer it is ok to come out and spend again.  But, while this is not going to be an overnight process once the COVID-19 pandemic subsides, it will be a relatively short-term issue. 

In the meantime, expect market fits-and-starts as it tries to digest the news and data in order to properly value the shares of companies based on earnings expectations.  Granted, no market event is exactly the same as another, and as I have mentioned in past communications this current bear market has vast differences with the 2008-2009 bear market; however, remembering what past market events looked and felt like can steel our expectations for both positive and negative turns along our current investing path.  This chart shows a picture of the S&P 500 during the 2008-2009 bear market and its subsequent recovery.  I’ve circled periods that duped investors into “calling a bottom” when really the bears were just taking a break, made investors despair of ever seeing market gains again, or triggered market PTSD during the beginnings of a historic bull-run. 

Here are my take-aways:

  • Steel your expectations – we are probably still on a rough and bumpy stretch on the road to recovery. In fact, we probably haven’t even started to truly recover yet because we do not have a clear picture of what that will look like.
  • Stick to your long-term investment strategy. I am starting to sound like a broken record here, I realize, but maintaining a long-term view of investing is the only way not to fall prey to the tricks and traps the market will present in the short-term. 
  • Remember the thing that drives investment gains over time– innovation and progress. Pandemics, financial stress, wars, natural disasters – these are short-term events that actually spur future innovation and progress as humanity works to solve issues and not only survive but thrive.
  • In the meantime, look to the silver-linings in your investment portfolio:
    1. Income generation – dividend and interest payments that continue to come into your account based on the companies and bonds you own despite their “value”.
    2. Rebalancing Opportunities
    3. Since Inception performance rather than Year-to-Date or Month-to-Month performance – the longer you have a portfolio the less short-term market events like this one affect your long-term average annual performance.

Ok, now that you are properly prepared for this bear market rally to end at any moment let me finish on a couple of positive notes.  One, I could be totally wrong – it has happened before, just ask my wife.  This rally might be the real deal, quarantine could end in May and the global economy might have so much pent up demand for fun that it bursts back on the scene like Richard Simmons coming out of a birthday cake.  In fact, I hope I am wrong…that would be awesome.  Finally, there is good news out there despite all the bad news.  And, I mean real good news, not just market news, economic news, etc.  Neighbors are coming together to help one another.  People are cheering and supporting healthcare workers and first responders.  Kids are beating cancer diagnoses, a family somewhere got a new puppy, and the sun is still rising in the morning.  If you don’t believe me – go here

And, if the bad news or your current circumstances are still too over whelming to allow you to see the good, please reach out for help.  If not from us, then from family, friends or maybe even professional counselors and/or spiritual advisors.  Nobody is beyond hope. 

Stay Safe, Stay Healthy, Stay Home.

National Suicide Prevention Hotline:  1-800-273-8255  

* S&P 500 data collected from

** Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss. Past performance is not a guarantee of future results. This material may contain forward looking statements and projections. There are no guarantees that these results will be achieved. It is our goal to help investors by identifying changing market conditions, however, investors should be aware that no investment advisor can accurately predict all of the changes that may occur in the economy or the stock market. The Standard & Poor’s 500 (S&P 500) is a stock market index containing the stocks of 500 American corporations with large market capitalization that are considered to be widely held. The S&P 500 is unmanaged and cannot be invested in directly.

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