MARCH 9, 2020
It has been a trying two weeks since we last wrote to you. Not only for the markets, but collectively as we each seek to keep up with the news about the coronavirus and its impact on our daily lives. While our first concern in both calm or volatile markets is for your financial health, we are also concerned with your physical health and wellbeing. We hope each of you and those close to you are healthy and remain so.
You often hear us say that we build all-weather portfolios and it is in times like these where we are tested on how we navigate the storm. Every storm is different. This one is too, but it is not uncharted territory. To provide some perspective, if we look back at recent history, we have all but forgotten the sharp, trade war related downturn in late 2018 when the markets were down shy of 20%, more than the current coronavirus selloff. The market recovered from that selloff, just as it has with prior downturns. If we look back at the health-related selloffs, from Ebola or the Zika virus, the stock market was able to recover from each in a short time. Looking at the most closely related SARS selloff from 2003, the S&P 500 sold off 14% during that scare, only to be up 20% a year later.
The stock market abhors uncertainty and is strongly reacting to the unknown economic effects of the coronavirus. There will be a negative economic effect in the short-term, which the markets have already priced in. The magnitude and effects of longer-term impacts related to the coronavirus are unclear, which is what is driving the ongoing large market movements. Storms come and they pass, they do some damage, but we always recover. Despite the turbulence of this storm over the last few weeks, the U.S. stock market is still above its level from 12 months ago.
Please stay healthy, be mindful of the news, and know that we are watching conditions closely and taking advantage of opportunities as they arise.