As this current health/financial crisis evolves, the rate of increased fear is head spinning. The pace of rapid decline and then what we call “dead-cat bounces” (sorry cats), increases anxiety and has a domino effect on selloffs. Will we have a V shaped recession and recovery or a U shape recession and recovery? No one really knows but we hope for a V shaped recovery because that might mean by the 4th quarter of 2020 or the 1st quarter of 2021 we could look at a robust recovery resulting in increased infrastructure and health care expenditures and increased tax for higher income individuals. At the same time, we have clients, or we all know people who are near retirement or poised to make big purchases, who have seen their portfolios decline by 20% or more from the highs reached less than one month ago. Head-spinning as I mentioned!
The solution to head-spinning is financial planning that enables you to put all the pieces of your financial life together to look ahead to your financial goals.
The best decisions are those made based on your goals, not on markets.
Since the only guarantee we make is that life changes, we focus on the decisions you have control over. We have no control over markets but do have control over asset allocation. Conservative diversified allocations protect cushion portfolios in times like we are experiencing now. Most important is not to sell.
Going forward, our investment plan remains the same: incremental increases in equity exposure for long term investment goals as fixed income securities mature or make distributions/interest payments.
Our role as your advisor is to be the voice of reason. That voice says this too shall pass especially when it feels like it will not pass, and you see no way out. When intense emotional feelings arise, research says it feels like fear as well as exuberance will last forever. A month ago, it felt like exuberance would last forever as markets surged through the first couple of months of the year after last year’s gains. As the voice of reason, we say again this too shall pass and to limit your news watching as we are doing that work for you as well as the worrying that goes along with it.
We can’t know how long this will last. If we were in charge, we would recommend a similar strategy that Germany is implementing. Open up the government fiscal spigot-similar to TARP-and be the buyer of last resort. That’s what happened in 2009. It was not easy to pass but it did. That kind of intervention would be one piece of the solution. The other piece would be to increase Covid-19 testing at the rate promised by those in charge of our country. Words matter but actions matter more. In addition to testing we need to get closer to reaching a peak in confirmed cases similar to other countries going through similar experiences.
We are hoping that we will get more clarification as the weeks go on. In the meantime, we are in “shelter-at-home mode” but available via telephone or Skype if needed and certainly by email. Stay healthy.
Your SAS Advisors