Market Update – 3-24-20
I want to start by saying that I hope all of you are remaining safe and healthy! Obviously, this is a challenging time for us all. More than financial, this pandemic has challenged us both physically and mentally.
It has been a few days since my last post and in that time, we have seen a lot of volatility in the markets (what else is new?). Accelerating declines on Friday (Dow down almost 1,000 pts), were followed by a seesaw market on Monday (Dow down more than 500 pts), capped by the single biggest up day in stock market history today (Dow up more than 2,100 pts.). Investing, like trying to grab a pack of toilet paper at the grocery store, has not been for the faint of heart.
Although I do not believe the volatility is over, I do think we are beginning to see some light at the end of this dark and deep tunnel. Stock valuations in many sectors have reached rock bottom. Although this has been the case for more than a week now, stocks were getting cheaper. Ironically, lower prices in stocks is a good sign for future stock prices. In the famous saying by Sir John Templeton, the best remedy for low stock prices is low stock prices. Extremely low valuations alone can be a catalyst for a turnaround, and we have seen some extremes lately, as pointed out in my last email.
In addition, Congress is (hopefully) putting the finishing touches on a Federal stimulus package the size of which the world has never seen. If executed, this package will help buy our economy time while doctors and scientists figure out a treatment and possible cure to this deadly disease. This stimulus package is expected to provide liquidity to small and large businesses in the form of low interest loans with the stipulation that employees are not laid off during this shutdown. In addition, checks will be sent directly to Americans to stimulate economic activity and grease the wheels of our economy. Although this will only be a stop gap measure, it will buy our country time to get our arms around this virus.
Lastly, areas of China such as the Wuhan, the origin of the Coronavirus, and South Korea are beginning the process of returning to normal economic activity after a period of their own lockdown. This is a great roadmap for the US and provides us with some clarity on just how long the ceasing of economic activity will last. It lifts much of the fog of uncertainty that has been troubling the market about the duration of this crisis.
The portfolios have been volatile right along with the market but are well off their lows. I do expect more volatility to come but continue to reiterate my call for cash. If you have additional funds lying around that are in excess of your required emergency reserve and you are comfortable investing for at least 2-3 years, the time to put that money to work is now. We have not been offered a better investing opportunity in several years.
We also know that many of you are still nervous and scared. This is a very logical response to such a challenging situation. Lauren and I understand you are concerned for the future. We want you to take the necessary precautions to protect your health. We will take the necessary precautions to protect your wealth. I do not expect that this pandemic and its accompanying market decline will have any material impact on your retirement. The funds that are invested in the market are funds needed years down the road. By that time, I expect Coronavirus will be a distant memory. Time will tell!