Last week we were headed for the worst week in the markets since the Great Depression.
This week we are on target to have the best week in the markets since the Great Depression.
What does it mean for Today?
- We cannot time the market. Investing is a long-term endeavor.
- There is a difference between a trader and an investor.
- Do not fight the Fed. An ability to print money provides remendous rescue power.
What does it mean for Tomorrow?
No one really knows but some general observations are taking shape:
- - Traders are making money on asset volatility. Investors are making money buying perceived quality names at discounted prices with expectations for gains in the long term and a willingness to incur losses in the short term.
- - Wealth provides shelter from crisis and huge opportunities to benefit in the long-term from downturns. Wall Street will recover from this crisis. As in 2008, Main Street will take a much longer time to recover.
- - Few believe this is the bottom. Many expect more volatility and additional lows as unemployment, earnings guidance, debt delinquencies and bankruptcies begin to unfold.
- The Relief Package will take 2-6 weeks to reach individuals and there are many people who will 1) not qualify for relief and 2) be forced to receive unemployment which is enhanced only for a short period of time.
- - State Budgets are being decimated by social distancing orders and will likely require additional legislation to bail out states (unlike the federal government, state governments cannot run at a deficit) and possibly tax increases.
- The retail, hospitality, restaurant and travel/leisure sectors will get relief from the bailout but the damage will be permanent for the weaker segments of each industry. As rents begin to go unpaid on April 1st, the dominoes will begin to fall.
- The effects of the virus will be cyclical with highs and lows continuing throughout the US and worldwide. We will see deaths and infections recede followed by surges in both with continuing urgency around supplies of protective equipment.
- Few expect the country to be in a position to “reopen for business” in mid-April. Even in areas where it may be possible, a lack of demand for services may continue to depress economic recoveries.
- Covid-19 will have a dire impact on the Healthcare Sector. The ultimate price tag for the care of the infected will be huge. We began the crisis with a deficit in quality care, skyrocketing health care costs, loss of care in rural areas and a shortage of medical personnel. This crisis will only exacerbate and overload an already stressed system. Medical bills will flood patients, insurers, hospitals, urgent care centers, etc. with few resources available for payment.
- The Covid-19 Crisis will further exacerbate inequality. As the presidential election nears, voters will process the Socialistic Rescue required to save our Capitalistic Economy. It is impossible to predict the long-term political impact and outcome.
What does this mean for You?
- The world will be different once this crisis passes. We will adapt to new ways to govern, communicate, work, shop, maintain our health, spend time with loved ones, spend/invest and plan for the future.
- The market is not out of the woods. Accept that the resolution of this crisis will be years not months and your investment accounts will suffer as solutions are worked out. Panic is not an investment strategy.
- Continue to focus on what you can control: Cash Accumulation, Minimal Expenditures, Maintain Asset Positions (unless you must liquidate for survival), Know Your Balance Sheet, File Taxes ASAP if a Refund is Due.
- If you see this as a “Buying Opportunity”, exercise caution. Assuming “buy” means job security, consider increasing your 401K contribution rather than deploying cash to 1) benefit from dollar cost averaging and 2) maximize tax benefits
- Where possible, continue to support local businesses/individuals whose services you value. Your support may be the key to their survival.
- Health is the most valuable asset. Continue to practice social distancing consistent with expert advice/guidance.