May 11, 2020
We begin this weeks note reminded that COVID-19 continues to be a societal beast bringing with it all the emotions of fear, trauma, and anger, at home and around the globe. In addition, concerns of finances, the markets, emotions, and a lack of control, coupled with uncertainty, will warp our minds if we are not careful.
As investors, it is most important that we keep our heads on straight and realize that the unusual is not usual and just a state of passage to the next “new normal”- we will get through this. Do not get too caught up in the short term and the daily self-perpetuating news prevalent across all spectrums of the media. When drama and negative events hit the markets, be careful, take stock of investment information as fact rather than fiction and balance your emotions to avoid panic driven mistakes.
The best financial vaccine is always found in a balanced portfolio aligned with investor goals and objectives that focuses on both the upside and downside capture of the investment portfolio. Easy to write and say, yet sometimes, investors tend to act on the emotions of fear and greed – human nature. Which is why all investors need the help of a Sherpa… a financial advisor to provide guidance and planning to weather the uncertainty as we are experiencing today.
Despite the daily headlines of recession, secular bull market, and the financial markets in general around the globe, there is some optimism to consider.
- In traditional risky investments of technology and health care, the virus has only added to the positive performance of these areas – driven by the new normal we now experience in remote working, efficiencies and the need for health care additional products , services and medications – we should not lose sight of these two areas as we emerge from COVID-19 and thereafter.
- The role that government stimulus is playing to support and help keep economies functioning: “do whatever it takes”. The markets have shown overwhelming confidence in this approach taken- lessons learned from 2008.
- Company earnings will be unpredictable for the next 1-2 quarters. The markets could be in store for volatility with many companies refusing to give guidance on their next quarter earnings. Yet on the other hand, it could be one bad quarter and then back to normal by year end, or, to a new normal driven be efficiencies.
As a footnote to the above, while the global economy trudges back to recovery we may see unprecedented performance from ‘’risky assets” or future disruptions as society moves to a different way of conducting business, health care and consumerism. In addition, the tightening yield curve in fixed income markets may also provide some opportunity in the bond markets- again similar to 2008, yet the fixed income specialists have learned a thing or two since then.
We are reminded, the speed of the market movement from crest to trough and back again is what caught everyone off guard causing investors to pause and reflect. Are we out of the woods yet? Maybe. The current results may understate the possibilities and prospects for a changing world down the road.