Markets were down again this week by 15% to extend the year-to-date losses to -28.7%. Many stores have shut down and employees are being sent home. Cases of coronavirus continue to rise as the effects of social distancing wont been seen for at least another week. It is our expectation that the number of cases in the US will continue to rise as test kits and test sites become more available. Unfortunately, unemployment will likely increase over the coming weeks and months by large numbers as those most affected by the shutdown apply for unemployment benefits.
The White House is working on stimulus packages to help US citizens. Tax and payment deadlines have been extended to July 15 and there are conversations about getting funds paid directly to taxpayers to help them get through this downturn. The specifics of payments have not been released. Other parts of the economy seem to be less impacted. Loans rates are still low and the FED continues to backstop liquidity.
We have continued to review portfolios and talk with clients. For some clients who are significantly underweight equity targets, we have continued to buy stocks as the market declines. We are not sure where the bottom of the market is but we feel that the market is providing a good entry point. We have always taken a long-term outlook for portfolios. As long-term investors, we do not believe in making short-term trades that attempt to time the market. Our decisions are based on building wealth over time for the clients that we work with.
During all of this, it is important to remember that market bottoms do not (and often don’t) have to coincide with peak bad news. For instance, look at the below chart from the financial crisis. You can see that the bank index (blue line) bottomed in early 2009 well before bank failures (gold line) hit their peak. I add this as point of reference as many expect the number of people infected with the virus to continue to increase. Our belief is that just because virus numbers continue to increase, it doesn’t mean that the market has to continue to decline.
If you have concerns about the market or your portfolio, or if you simply want to talk about what’s going on, give us a call or send an email. Enjoy your weekend! - JR
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