Stocks came under another brutal day of selling pressure as fears the coronavirus continues to ramp up. Let’s take a moment to try to analyze and understand what is going on. For weeks, we have wondered why market participants weren’t taking the economic threat of the virus a little more seriously. Indeed, until the last few trading sessions, the market averages were busy setting new highs on a daily basis. But, now we have finally seemed to realize that the virus is causing a lot of economic angst, not to mention the very unfortunate human toll. We can only guess as to the short and long term damage that may occur from the virus spreading and becoming a true pandemic. It appears that is what is almost surely going to happen.
We have dealt with health and disease issues many times in the past. For instance, in 2003 it was the SARS virus which attacked the upper respiratory system. During the height of the SARS breakout stocks fell more than 12% over a little more than a month. During the more recent Zika virus the market fell in a similar fashion- about 12-13% depending on how you measure it. Of course, there has been Ebola, mad cow, bird flu, and I’m sure other things I’m forgetting at the moment. The major takeaway is that all of these health crises cause disruptions in the markets and understandably so, but they were all temporary in nature. Now, what is temporary, 6 weeks, 6 months, or more? No one knows, but unless this is it, and everyone on the planet is going to die from COVID-19, it will once again be something that will pass. Again, what we just don’t know is how much pain are we going to have to deal with until treatments and vaccines are readily available, and the proverbial coast is clear?
Until then, the investment strategy is simple. If you are in the accumulation phase of life, keep systematically investing and take advantage of lower prices. If your adult children call to ask what should they be doing in this crisis (guessing it is the first one that they have experienced), you tell them that the kind folks over at CHJ are saying just keep on doing what you are doing and be glad you are able to buy at better prices. If, on the other hand, you are in the distribution/income phase of life, you already have your allocation set which should be providing the income you need and the volatility that you can stomach.
If disruptions like these cause you to lose sleep at night, give us a call. Your allocation might need a little tweaking, or maybe you just want to hear a reassuring voice on the other end of the line.
As for today’s mess, the Dow Jones Industrial Average was down 879 points to close at 27,081. The S&P 500 was down 97 points to finish the day at 3,128. Gold was down $35 to trade at $1,641 per ounce, while oil was down $1.64 to trade at $49.79 per barrel WTI.
I hope this email helps put some of the recent trading action in perspective for you. Let us know if it helps or if you’d like to hear us do a live conference call. We always strive to provide the best service in the industry and we take that very serious.
Have a nice evening everyone.