"The Only Thing We Have to Fear is Fear Itself" - FDR

We encourage you to focus on your health, physical and mental, at this time. Breath. Meditate. Pray. Walk. Exercise. Play music. Spend time with family. Do everything you can to remain calm amidst the turmoil in the stock market and the economic stress ahead. If writing us and calling us helps calm you, please reach out. We are here. We want to talk with you in these moments, and we are watching closely.

Don’t touch your face and don’t touch your stocks either. If this is the right advice for you it can be tough to follow. One out of habit and one out of panic. A tried and true stock investing mantra says sell in euphoria and buy in fear.

The majority of well prepared people, including retirees (who are most at risk financially and in health), can say the following about their financial situation just before this crisis began:

• They have a cash reserve of at least 3 months’ expenses
• They have at least one source of reliable/guaranteed income
• They have bonds, cash alternatives, and gold (not 100% in stocks) which are generally holding up
• They own high-quality stocks, or stock funds, with low exposure to the most volatile types of stocks
• They have equity in their home (if they own)
• They have access to lines of credit
• They have flexibility to reduce withdrawals or defer a required distribution until later in the year
• Many had taken profits and reduced risk prior to the end of 2019, after the run of the past 2 years
• They have a long-term financial plan, with levers to pull for contingency purposes

In short, we can weather this storm, and with ways to buy time to a recovery, before being forced to sell high-quality investments at a low price point.

This is a scary time, with dropping portfolio values, and lots of uncertainty. We do not wish to minimize that. There have been many past crises which have proven that high-quality investments in stocks and bonds (taxable and municipal) have historically recovered, for investors who stayed the course. The typical bear market lasts 21 months. Even the worst financial crisis in modern history, 2008-2009 had recovered within 2 years. Many who lost the most in that crisis were those that sold on the way down and did not reinvest in time for the strongest part of the recovery. Unrealized loss happens on the downside. For investors who did sell in bear markets, actual, realized losses happened on the recovery, which can be swift, because their assets weren’t invested during the early stages of recovery. Investors, both amateur and professional (including our team) typically do not have success in determining the best time to re-enter the market. See the “avoiding the panic trade” data in the resource below, which shows significant difference in returns when investors miss the 5, 10, and 20 best days of a recovery period.

For those whom were fully invested going into this, staying invested (except should cash reserve be too low) could be a good option. For our clients who were not fully invested prior to this bear market, with cash on sidelines, this may be a good time to start buying stocks in 3 to 4 stages over multiple months. For those clients who are putting cash to work, we have only done one round of putting cash to work in the past 10 trading days.

If you are concerned you don’t have enough cash and credit to get through the next 12 months, reach out and let’s discuss your choices. Together we can arrive at a solution.

Should you wish to read more, learn more, and anticipate what to expect in the coming months of this bear market, below are reminders and resources from Raymond James, and a third-party investment expert.

Click here to replay the Black Swan Coronavirus presentation. Our Chief Investment Officer, as well as healthcare and policy experts, connect on what may lie ahead for the market and the economy.

Click here recent article American Funds CEO – familiar, non-jargon speak, from someone who has seen many past bear markets and recessions.

Lastly, many of you have heard us say in recent reviews or in our new years’ missive, that while we were overdue for a bear market, that we did not think a recession was probable in 2020. The health of corporations (much healthier going into this crisis than they were in 2008) was fairly strong at turn of the year. We do agree with the Black Swan classification of the virus’ impact on markets and we are now likely to experience a recession, driven primarily by reduced incomes and reduced consumer spending.

Sincerely,
Rachel Nohlgren

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© 2018 Raymond James & Associates, Inc., member New York Stock Exchange / SIPC.

Any opinions are those of the author and not necessarily those of Raymond James. Every investor's situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Investing involves risk and you may incur a profit or loss regardless of strategy selected. The forgoing is not a recommendation to buy or sell any individual security or any combination of securities. Past performance may not be indicative of future results. Be sure to contact a qualified professional regarding your particular situation before making any investment or withdrawal decision.