Although I am not able to report on a major positive event such as a COVID-19 medical breakthrough, I believe it is important to keep our lines of communication open and reinforce behaviors that have helped us weather the storm to this point. I have spoken with many of you over the past several months and I am pleased to report, that for the most part, we are pulling through this crisis relatively intact.
We could never have predicted the situation in which we find ourselves today, which is exactly the reason why giving consideration to that which cannot be known is so important when developing and updating our financial plans and investment strategies. Our collective focus on keeping these plans and strategies current helps to provide us with the peace of mind that can be so comforting during periods of uncertainty.
Where We are Today
COVID-19 has already killed over 470,000 people worldwide (World Health Organization) and 121,000 in the United States (Center for Disease Control (“CDC”)). While several states are experiencing a slowing of COVID-19 cases and hospitalizations, several other states are experiencing sharp increases. There is not conclusive evidence as to the cause of the increases; however,
CDC’s Guidelines: How to Protect Yourself and Others
appear to be effective in managing the spread of the disease where the guidelines are diligently followed.
Even with the uncertainty surrounding the virus, stock markets around the world have rebounded strongly from their lows in March, and much faster than many expected. There are certainly good reasons for stock markets to show resilience in the midst of all this. At the same time,
it’s possible the markets’ rebound may be a bit overdone, risking another possible downturn(s) in reaction to upticks in COVID-19 statistics, delays in medical progress, disappointing global economic data, and increasing uncertainty related to the approaching Presidential election.
While the pandemic has presented us with many struggles, it has also given us the opportunity to challenge the status quo, and in doing so shape a “new normal.” For example, we have learned that for many us, working from home is not only possible, it is very practical. We have also strengthened our resiliency and learned to leverage technology in meaningful ways to support home schooling and stay connected with loved ones. Those who have long commutes gained real time while working from home, enabling them to focus on family, friends and other priorities.
I am proud of your efforts to successfully adapt to the uncertainties presented by the pandemic. And, we will continue to stand by you to offer guidance, support and reassurance.
it is clear that the U.S. has fallen into its deepest recession since the Great Depression. As the economy stabilizes, the government will have to tackle massive federal debt and a deep budget deficit. These factors in conjunction with easy monetary policy, could cause an inflation spike, forcing interest rates higher and making debt more expensive to service. Unpopular decisions may have to be made to raise taxes or cut spending to restore federal finances. Adding to the challenges posed by the pandemic are nationwide social unrest and a dysfunctional political climate.
We should recognize there can be no full resumption of “Life as we knew it” nor real economic and capital market stability until we have effective COVID-19 treatments and/or vaccines. On a positive note, never before have the world’s scientists, corporations, and governments come together to find a global solution to a global health problem.
While uncertainty remains elevated, more clarity will come as the medical and economic situation evolves. Before long, we will be contending with a new market cycle with different characteristics and investment themes.
Key Factors for Success
The extraordinary events of the past few months serve as a reminder of the benefits of diversification, as well as the importance of paying attention to valuations and maintaining a long-term perspective in investment strategy. No one knows what the future will bring. Investing has always been and will always be risky. Rebalancing has worked well during the COVID crash as it has for the past three bear markets. A couple additional points to remember:
- The best time to make portfolio shifts to more conservative investments is when we are not in a storm. If you are having any worrisome doubts about how your investments are currently positioned, please contact us immediately.
- We should not confuse risk and volatility. Bailing on stocks now reduces volatility, but may lead to the ultimate risk … running out of money in the long run.
Timeless investing principles are especially relevant in the current recession given the heightened uncertainty and volatility.
As the world recovers from COVID-19, investors should follow common sense principles, including remaining diversified, having an investment plan, and staying invested in equities. Diversification remains essential even with interest rates at historic lows, as good quality fixed income will serve as a ballast if the economy suffers another shock.
While we are in "Phase 2” of the reopening in RI, we are continuing to meet virtually with clients. Although our onsite office hours are limited, our availability to meet your needs has not changed, and our focus remains doing what is in your best interest. If you want to consider adjustments to your investment strategy, additional distributions, risk profile changes, or just need a little reassurance, please contact us anytime.
Helping you live your
has always been and will always be our top priority.