“Do you have the patience to wait
Til your mud settles and the water is clear?
Can you remain unmoving
Til the right action arises by itself?”
~ Lao Tzu, Tao-te-Ching
There are three distinct areas that we can be concerned about today. The virus, the markets, and the economy. I will not expound upon the virus any more than to say, I would recommend everyone listen to Dr. Fauci when it comes to the virus itself. I have already canceled all non-essential appointments, rescheduled others to zoom calls, and like my wife, we are alternating our duties of working from home and childcare of our 19-month-old child. The other areas, where I have more experience and competency are the market and the economy.
What about the market? As I write this on Monday at 7:41 AM, it’s not going to be a great day. Should this create some action on our part? The short answer is, no. For most investments and investors, it should be seen as a long-term play. We cannot know where the bottom is and the perfect time to get back in. Every bear market will have many times where it will go up and seem to be done only to drop again and convince many we are in for another sharp decline. This happens in every bear market. Social media and the financial networks will likely amplify the craziness and it is easy to become paralyzed at the moment. The market has survived every disaster, pandemics, terrorist attacks, and World Wars, and yet, it has always come back stronger than before. Diversification is key.
You will no doubt, see bankruptcies in the market including some names that may even surprise you. If you hold ETF’s and mutual funds you are invested in hundreds or thousands of companies which is a positive. Money is invested in your 401k, IRA, and other investment accounts are buying assets at cheaper and cheaper prices, which will also benefit you in the long run. Now is not the time to get out of the market because we want to buy low and sell high, not the other way around. If you don’t need the money for the next few years, leave it alone and make sure that to continue your deposits into your investment accounts. I can tell you that my wife and I are both continuing to put our deposits into our accounts.
What about the economy? There is no doubt that the current course of action to combat the virus, both nationally and globally, is going to have a profound impact. This could lead to a recession, which is defined by negative economic growth typically across two consecutive quarters. This quarter, ending this month, and Q2 will both likely be lower. This is why the Fed just lowered the Fed rate to zero and injected $700 billion into the economy in the form of quantitative easing. The Fed is trying to limit the recession to 2 quarters. (add a Hyperlink?)
The $700 billion is to stabilize treasury prices and to provide liquidity to the banking system. The primary reason is to keep businesses in business by providing adequate capital. You will see people complain about this. My recommendation is to not focus on that. It is a positive move in my opinion. It is better when the company that employs you can borrow to pay you or you can borrow to keep your own company open.
In addition you may also see the 4/15 tax deadline get pushed back. However, if you are expecting a return, go ahead and file it and get that money in your bank account. There is also a good chance that the payroll tax holiday gets passed and this will create some additional cash flow for you and your employer. Also, I would suggest you take this time to reexamine your spending habits. See if there is any fat that can be cut from bad habits developed over time. This last point is a good practice in general but can be extremely useful in our current time.
You will probably see these journals come out more often in the coming weeks to be an added tool for you. I will also likely put together a video call for all who wish to attend. I also encourage all of you, client or friend, if we know each other well or barely at all, to reach out to me using the email link at the bottom of this bulletin if I can be of any service at all. If there are any topics you would like me to address over the next few weeks let me know.
I encourage all of you to take this time to be the support others need as well. Hug your child, spouse, pet, or just yourself. We will all get through this together!