We’ll be reaching out again later this week after our scheduled call on Wednesday with the economist team at JP Morgan to share their perspective on the current crisis. For this evening, we’d like to offer you the views of our partner Doug Lynam, our resident Benedictine monk-turned investment advisor whose book,
From Monk to Money Manager, went out to many of you earlier last year.
Monday, March 16, 2020
Dear friends and clients,
It’s natural to feel anxious these days. As the markets fall, and our assumptions about normalcy shift as dramatically as the Dow Jones, many of us worry about the repercussions the global crisis will have on our lives.
From my experiences as a Benedictine monk for 20 years, as well as what I’ve learned from being a money manager, I’d like to offer some words of encouragement and a little market perspective.
First, my thoughts as an investment advisor:
The primary question that races through our minds right now is, “What should I be doing with my money?”
The simple answer is – probably nothing. If you have a solid financial plan and proper asset allocation in alignment with your goals, now could be the worst possible time to make significant changes.
The data on this is clear: Panic selling is a losing game because you must accurately time not only when to get out, but also when to get back into the market. A close to impossible task.
The risk of getting blindsided while making such moves is huge. For example, from January 3, 2000, to December 31, 2019, the S&P 500 had an annualized return of 6.06%. But if you missed the ten best days of the market during these two decades, your return would only be 2.44%. Complicating things further is the fact that
six of the best ten days occurred within two weeks of the ten worst days. In other words, when things look darkest can be the most important time to stay in the market.
Under stress, our limbic systems kick into high gear with a fight, flight, or freeze response. That often creates a compulsion to do something concrete to take back control when life throws us a curveball. There are prudent actions to take now to protect your health and safety. Changing your financial strategy is probably not one of them. Markets like today are the reason we diversify among stocks, bonds, and alternatives. We have already laid that foundation in our client portfolios.
There is no doubt that we are in for a challenging year ahead, but this will end in due course. We are invested for the long term. Acting out of fear right now can torpedo a buy-and-hold approach that has historically rewarded investors, even through the worst bear markets.
If you feel compelled to do something, then counterintuitively, the best long-term course of action may be to buy stocks while they are on sale. If the price of clothing dropped 50%, your first reaction wouldn’t be to sell your entire wardrobe at a consignment store. Instead, the prudent move would be to take advantage of sale prices.
Since we can’t know when the bottom will hit, one way we can take advantage of lower prices is to “dollar-cost average” using cash reserves to incrementally add money to stock positions over time. If cash reserves aren’t available, we can accomplish something similar by rebalancing your portfolio when weightings stray too far from your allocation targets.
It may be reassuring to remember that there is only one rolling 10-year period on record when the stock market had a negative return. Markets have consistently rewarded long-term buy-and-hold investors.
Now, my thoughts as a former monk:
The Covid-19 crisis has made our interdependence clear: We can no longer avoid seeing the intricate web of life and economics that sustains civilization. It’s a truth we’ve avoided too long, at the expense of our communities and the environment.
I think the Great Adventure in spirituality is about seeing higher levels of connection, and striving for greater opportunities to love and serve. As we brace for more deaths and disruption in the coming months, and our families and friends struggle spiritually and financially, we’ll need all the love and acts of service we can muster.
It’s often said that gratitude is the heart of prayer, and this crisis has made me more grateful than ever. I find myself “praying” in a continual flow of gratitude for the many blessings in my life: the people I love and who love me, and the simple pleasures of being alive.
In this challenging time, I encourage you to provide for others, find and express your gratitude, and embrace our co-reliance.
In that spirit, I offer you a poem that one of our clients shared with us yesterday by Lynn Ungar, a writer and Unitarian minister.
What if you thought of it
as the Jews consider the Sabbath—
the most sacred of times?
Cease from travel.
Cease from buying and selling.
Give up, just for now,
on trying to make the world
different than it is.
Sing. Pray. Touch only those
to whom you commit your life.
And when your body has become still,
reach out with your heart.
Know that we are connected
in ways that are terrifying and beautiful.
(You could hardly deny it now.)
Know that our lives
are in one another’s hands.
(Surely, that has come clear.)
Do not reach out your hands.
Reach out your heart.
Reach out your words.
Reach out all the tendrils
of compassion that move, invisibly,
where we cannot touch.
Promise this world your love–
for better or for worse,
in sickness and in health,
so long as we all shall live.
We’ll get through this together.
Peace and blessings,
David Cantor, Harlan Flint & Doug Lynam
LongView Asset Management