Being a long-term investor can feel lonely sometimes. Like that kid in high school who had enough courage to stand up to a bully when all the other kids laughed or remained quiet. The other kids knew the bully was wrong, knew the right thing to do, yet decided it’s just easier to do what everyone else was doing. It’s rather normal human behavior, actually… to follow what the crowd does. If everyone is doing it, maybe we should too. But, that one kid, the courageous kid… stood by his or her convictions and didn’t care how the other kids felt about it. You have to respect that kid because that stance is not easy.
Being a long-term investor sometimes requires that same conviction, especially when it feels like everyone who owns stock is selling but you. Because it feels like every major corporation traded on the stock exchange is going to go bankrupt. And it feels like this virus is going to last for years and we are all doomed. Yet you know that not every major corporation will go bankrupt and that the virus cases will flatline and then end at some point.
Unfortunately, some smaller local businesses will go bankrupt. And this is very unfair and very unfortunate. I hope that we all do what we can to help the local businesses and their employees. They will be hit hardest. But as unfair as it may seem, the vast majority of huge corporations will make it through this. They have the cash, the power, and the government on their side.
Many investors stay fully invested during both good and bad markets. The incredible success of John Bogle and his company the Vanguard Funds have proven that this works really well over time if you can stick with it. That is a big “if” indeed because it is not easy to do. The incredibly hard part is sticking with it through bear markets. Bull markets are a piece of cake to stay invested in. Believe me… I understand how hard it can be some days. The truth is that it’s not easy for me either during difficult times, but I stick with my convictions because history tells me it’s the right thing to do. I’ve been through two bear markets prior to this one in my 20-year career. Both of those times were very challenging, but we persevered. Nothing was easy about it.
Will this pandemic end? Yes. At one time China had cases of Covid-19 growing at 30% a day until it “flattened the curve” at around 80,000 infected. The virus has hit them the hardest so far. Their stock market is also down this year at around negative 25%. Unemployment in China spiked by 1-2% to around 6.2% because of their shutdowns. Many jobs were lost… millions even. But, now reports say there are around 70,000 people in China that are fully recovered from the virus with, sadly, over 3,000 that have died. The remaining 7,000 people with the virus are in recovery, with most expected to recover just fine and a smaller percentage listed in critical condition. Let’s make sure we pray for all those who are sick no matter where they are located. But they are now closing the makeshift hospitals, reopening major factories and even most of the Starbucks in that country are open. Life has changed but they are now on the “other side” and will no doubt be trying to rebuild their economy and daily lives. South Korea has only 8500 cases and has already “flattened their curve” in only about a month’s time. Their approach to dealing with the virus involved using many testing centers, as much technology and equipment that they could and even daily text messages to share information. At one point, South Korea was the country with the highest number of infections outside of China but was quickly surpassed by other nations. Businesses are open and the street crowds are almost back to normal. It is not the end of times in South Korea. Their stock market (the KOSPI) is down over 27% year to date and they are now rebuilding their economy.
At our firm, we believe the virus cases in the U.S. can flatline within the next month or two IF we all do our part and the government does theirs. At 11000 current cases in the U.S., it will HOPEFULLY flatline before we reach Italy’s current 41000 cases as I write this. Under 30000 could even be a goal we all work together towards as a united nation. The fewer cases in the beginning of this crisis will make this much more manageable and help it to end quickly. Italy hesitated and it is costing them dearly. The U.S. certainly has the technology, communication skills, and the most resilient citizens in the world to accomplish it. Economically speaking, the Fed has cut rates to zero, a trillion-dollar stimulus package is on its way, tax breaks are in the works, checks to consumers may be in the mail soon, and available loans from the government and our very well-capitalized banks are available. Testing kits are finally being be made accessible, which can produce quick results. Knowing if you are carrying the virus has proved invaluable in South Korea. Hospitals are preparing, people are hunkering down at home, and pharma companies are working on treatments and vaccines. I even got my first text message about the virus from a government agency yesterday. Things will get better sooner than you think. If you can stay invested, please do. If you can’t sleep at night, then raising some cash may be appropriate for you, but understand it will likely cost you some money in the end. Missing the beginning of a market turn usually does. Sleep is important though and our team is more than willing to discuss your personal situation with you. This is why I say being a long-term investor can feel lonely. Just know you are not alone and we are here for you.
Let’s all do our part and we will get through this together. God bless you and your family.
Gregg Pacitti CFP
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