Folks, these are trying times. We are being tested on many levels, both emotionally and financially. I thought about just posting my typical Weekly Market Recap, but y’all have probably had enough bad news and anxiety to last a lifetime already this week.
All of you have been affected by the COVID-19 pandemic in one way or another. Maybe you’ve contracted the virus or know someone who has; you’ve watched your portfolio diminish in value; you’re afraid to leave the house, and you’re worried about the future. And rightly so. Whether you’re just starting your career or already retired, this IS scary stuff.
Naturally you may be asking yourself the age-old question, “is it different this time?” Let me answer this from an investment standpoint. Absolutely not. Sure, every crisis has a different catalyst and circumstances surrounding it, but they all follow the same patterns to varying degrees. This crisis is no different.
At 43, I still consider myself a fairly young guy (although the bald head and graying beard may say otherwise). But, I’ve been in the investments industry for 21 years – first with Invesco and then for the past 17 years with Financial Synergies. I have not seen it all, but I’ve seen a lot. (Now our founder, Mike Booker, probably has seen it all but I’ll leave that alone). Anyway, I’ve been through two of the worst market crashes and subsequent recessions in history – the Dot-Com Crash 2000-2002, and the Financial Crisis 2008-2009.
So what, right? Many of you have been through much more than that over the decades and lived to tell the tale. But when you work in the wealth management and investments industry you live and breathe this every single day. Speaking with hundreds of clients through these various crises has given us a unique perspective. Although our lives are unique and complex, we all experience the same basic human emotions that drive us to make our decisions.
We are in the midst of one of those rare crises that we’ll be talking about for years to come; much like we’re still talking about the 2008-2009 Financial Crisis to this very day. And much like my grandmother would tell me stories about the Great Depression in the 1930’s, I remember thinking to myself, “that could never happen again, right?” Hey, I grew up in the 1980’s where the good times never ended. But as I’ve gotten older I realize anything could happen, and sometimes it does.
But you know what? Even with all the crazy ups and downs, and yes, scary as hell downturns, investing in the stock market was still one of the best moves anyone could have made. And it still is.
I don’t know when this will all end or when the market will bottom out, but it will end. The United States will go back to work and life as we know it will resume. And being invested in the market is the only way you will recoup your losses.
Let’s take a look at what the market’s response to crisis has been over the last three decades:
As you can see the market’s performance following severe crises has been overwhelmingly positive. I suspect this time will be no different. Believe me, I’m no Pollyanna – it’s not even inherent in my personality. But I believe history and the human condition to be the strongest indicators of our future.
For those of you who are on the cusp of surrendering to the market’s violent downturns, please reconsider. Do not give in and violate the cardinal rule of investing – selling after a severe market downturn. All you are doing is ensuring that you will never recover that capital. Losses are temporary as long as you hang on to the shares. If you sell you will irreversibly lock-in those losses.
Let me leave you with this. There is an 89 year old man in Omaha, Nebraska who has been waiting for this opportunity for 11 years. His name is Warren Buffett, and he’s considered the greatest investor to ever live. He is ready to pounce and looking to buy every quality company he can get his hands on. Why do you think that is?
Ask yourself this, if you had a pile of cash on the sidelines would you be buying? If the answer is yes, then why would you sell what you already own?
Steel yourself for what may come and we’ll get through this together.