Trisha shares her thoughts on the markets, either about specific events that are happening or the market in general. Please check back regularly for new content.
Quarter Two 2020 Update
When I wrote to you in January we had just wrapped up one of the better years of investment gains that the markets had seen in quite some time and the US economy was continuing to grow, fueled by confident consumers who were happily spending.
And then the Covid 19 coronavirus hit and everything changed.
As countries around the world, and now states here at home, have worked to try to slow the spread of the virus we have seen various levels of directives issued, all with the common goal of separating people. The unavoidable consequence of these social distancing measures has been a virtual shut down of certain parts of the economy. Without a doubt this will have a negative impact on the overall economy, both here and abroad.
History may not provide us with an exact playbook for this particular situation, but it does give us enough context to perhaps think about it in a long term, meaningful way. We've had global health scares before, several in my years as an investor, but Ebola, SARS, Zika, and the Swine Flu didn't come close to Covid 19 in terms of impact on the daily lives of people. But that doesn't mean we've never faced crisis of this magnitude before, and arguably even greater ones. I can personally remember the impact of September 11th vividly and the unprecedented reaction in the investment markets - which were literally shut down for days. But looking back in history I am awed by the people that lived through the Great Depression and then went on to fight World War II. What we are facing may be disconcerting but imagine living, and possibly even being an investor, back then. There is a reason that is called the Greatest Generation.
We don't yet know what the full impact of Covid 19 will be, but we do know some important things now that we didn't know when the stock market first fell based on the fears about it. We know that the best and brightest scientists all around the world are focusing their efforts on the things we need to transition back to a more normal life - a proven treatment for those that come down with the virus, more widespread testing and contact tracing to allow us to better isolate on a case by case basis rather than society as a whole and a vaccine that will hopefully allow us to move forward without fear.
And while this work is being done we know that policy leaders are doing a lot to shore up the economy and keep things afloat while the scientific world does its part. We have seen multiple unprecedented moves by our Federal Reserve that may not get a lot of attention outside of the financial world but that have been hugely significant in keeping liquidity in our system and confidence in our financial infrastructure. And in these hyper polarized political times it was really something to see all parties in Washington come together so quickly to pass the CARES Act, which is significantly larger than what was passed during the financial crisis of 2008 and passed in a fraction of the time.
While no one can predict a black swan event like a global pandemic, and I certainly did not but as investors started to realize that this is likely to be a temporary event stock prices did begin to move back up toward the end of March and that bounce continued into early April. Throughout last year and into the start of this one I wrote every quarter about how stocks may have been pricing in perfection and how we were somewhat cautious about valuations, in some cases leading us to selectively trim stock positions and rebalance toward fixed income. Looking forward, we are seeing select opportunities in stocks that we haven't seen in quite some time and will be looking to continue our process of rebalancing, only this time with the goal of shifting allocations back toward equities slightly. While we do expect volatility to continue as the issues with Covid 19 continue to play out, as long-term investors it is our job to take advantage of opportunities when they arise. As perhaps the greatest investor of all time, Warren Buffett, once said, "Someone's sitting in the shade today because someone planted a tree a long time ago."
Please stay safe and healthy and try to focus on the things that bring you joy in life. If there is anything that we can do for you, please let us know.
All indices are unmanaged, and investors cannot invest directly into an index. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties which are difficult to predict. Past performance is not indicative of future results. Diversification does not ensure against market risk.
Trisha Arndt, [email protected], is President of Wealth Strategies of Wisconsin Ltd, 951 Kimball Lane, Suite 110, Verona, WI 53593, 848-2400. Securities and Advisory Services offered through Commonwealth Financial Network, member FINRA/SIPC, a Registered Investment Adviser.