We Will get Through This
This is a scary time. Years from now we’ll all look back and remember this moment. There is a lot of uncertainty, and fear is a natural reaction and feeling.But we are optimistic. That hasn’t changed. Life will return to normal.There are lots of people focused on solutions and now is the time for everyone to play their part.Small positive steps add up. We will get through this. In the 1930s an Ohio lawyer named Benjamin Roth kept a detailed diary about what he saw during the Great Depression, here are a few points that he had learned from the debacle:“Business will always come back. It will remain neither depressed nor exalted.”“The stock market forecasts business in only a limited way. The beginning of a stock market movement usually is caused by the trend of business but in the end the movement is carried too high or too low—by the extreme optimism or despair of human nature.”“Depression is time of greatest profit. The investor who has liquid funds and the courage to act can lay the basis for great profits.”Let me offer some advice, echoing Benjamin Roth’s lessons from 90 years ago: We’ll get through this.It won’t be easy, and for some it will be agonizing. But no one should be surprised when a market economy that offers so many benefits occasionally asks something in return.Keep a few things in mind:1. Booms plant the seeds of busts. Busts do the same in the opposite direction.There are no exceptions to Newton’s third law of physics. Every action has an equal and opposite reaction.It’s tempting to fall for the siren song of booms because it’s so easy to extrapolate a positive trend without accounting for its offsetting factors. Booms make people complacent, assets expensive, and businesses fragile – all of which are easy to discount and hard to even measure when things are going well. It’s usually only in hindsight that we look back and realize how oblivious we were to the forces building up against us.The same thing happens in reverse during busts. Relative to literally five hours ago, people are more aware of the risks they’re taking, businesses are looking for ways to get more productive, and assets are priced for better future returns – all of which are easy to discount and hard to even measure when things are falling apart.It’s strange to think that we’re better positioned for future growth this week than last week. How can that be, given everything that’s happened? Well, it may get worse. But every step-down plants the seeds for the next ride up.2. What you see on CNBC and Twitter is not representative of 98% of the country.The last time things were this crazy was the summer of 2011, when the market quickly fell 20% and it was a foregone conclusion that we were about to experience Financial Crisis 2.0.Vanguard published a report a few months later that wrote:98% of investors didn’t make a single change to their retirement portfolios in August, when market volatility peaked … Ninety-eight percent took the long-term view. Those trading are a very small subset of investors.I’d bet it’s the same in recent weeks.It’s easy to say things like “everyone is panicking.” But it’s never even close to true. The large majority of investors, workers, and business owners are just trying to make it through the day a little smarter and more productive than they were yesterday.Always keep the breadth of “panic” in perspective.3. Optimism and pessimism will always overshoot because the boundaries of both can only be known in hindsight, once they’re passed.A blind man who doesn’t know where a wall is until his cane touches it, markets cannot know when optimism or pessimism has gone too far until they bump into the limits and enough investors protest in the other direction.The peaks and bottoms of market cycles always look irrational in hindsight, like they went too far. But in real time markets are just trying to find the limits of what people can endure.4. Without a doubt, the news will get worse from here. But its ability to shock us will diminish.The economic news about the economy was not getting better at the end of the financial crisis. But stocks stopped going down every time that bad news hit. It took a lot of pain to get to that point, but eventually, bad news fatigue had set in. This happened with regards to potential terror threats in the wake of 2001. It happened during the Asian currency crisis of 1998. It happened during the Latin American defaults of the same era. It happened during the Ebola scare of 2014. It will happen now.You must be fully prepared for both foreboding news about the contagion’s spread and, yes, even the death rate. You must also be prepared for how bad the March economic numbers are going to be relative to February. And it’s highly doubtful that anything turns sharply higher in April, based on the fact that nearly everything under the sun has been or will be canceled other than walking the dog and watching Netflix.But as bad as the news will be, its ability to shock us will diminish. We will reach the point of “Let me guess, sales are down this month.” The shocks – and there are many shocks still to come – will continue. But our reaction to them cannot remain at the current intensity forever. Remember that when progress is measured over generations, results and performance should not be measured each day, month or quarter.It looks bad today.It might look bad tomorrow.But hang in there.We will get through this.Some Positive News For a ChangeYou’ve read plenty of negative things by now. It would not be useful to share more of that with you. So, allow me to share a few pieces that are optimistic. You can call me names and laugh at me for looking forward if you want, but I’ll still ask you to read these things anyway.Research Team Has Isolated the COID-10 Virus. Link to article HERECanada's First Coronavirus Vaccine Made in Saskatchewan Is Now in Testing Stages. Link to article HEREApple Re-opens For Business in China. Link to article HEREWuhan Companies Allowed to Resume Work. Link to article HERE
As always, if you have questions about the current market, your investment portfolio or simply want to share your thoughts, please give me a call anytime.
Jason De Thomasis, BMOS, CFP®[email protected]T 905 731 9800 ext 229
Tony De Thomasis, BSc, CFP®
T 905 731 9800 ext 225
We are proud to introduce apps for both Apple Iphone and Android mobile devices.