Greetings! I hope this finds you well in every way.
As of April 30th the U.S. has recorded over 1 million documented cases of COVID-19 with nearly 62,000 recorded deaths. There are over 26.5 million Americans out of work and who have applied or are applying for unemployment benefits. The U.S. Conference Boards Leading Economic Index which covers ten economic indicators shrank in March by 6.7 percent, its largest decline in 60 years. April’s results won’t be announced until a few more days. All of this damage is due to the corona virus COVID-19. Who would have “thunk” it?
A bear market is defined as a -20% drop from any prior high. This year’s high point for the S&P 500 occurred on February 19 when it was up +5.08%. It took only 20 days to March 11 for the 500 to drop a total of -20%. It was the fastest drop to a bear market in stock market history. From there it fell another -15.51% to March 23 for a total peak to trough loss of -35.51%. As of May 1st the S&P is still down -13.1% from the first of the year, and it’s down -16.04% from the February 19th high. So the question is where does the market go from here? The answer is, I wish I knew!
If we study history of other bear markets it tells us that we will likely retest the low we experienced on March 23 on the S&P of 2305, before the market heals and gains solid footing. It just makes sense to me that this will happen what with all of negative effect corporate America is experiencing. The market recovery we experienced since the low on 3/23 is a bit overly optimistic for the short run. Time will tell but all will be well, if you stick to your diversified allocation model that matches who you are.
Meanwhile it’s meaningful to report Warren Buffett’s live streamed remarks to share holders of Berkshire Hathaway on Saturday at their virtual annual share holders meeting. He said “it now seemed unlikely the world would face the worst possible health and economic scenarios from the novel corona virus, compared with some of the predictions made earlier this year. Moreover the US economy will recover with time.” Mr. Buffett also said. “We’ve faced tougher problems and the American miracle, the American magic has always prevailed and it will do it again”. That man has access to more quality information and more experience than any investor in the world and if that’s his summation and attitude it’s good enough for me!
And so I too want to encourage you to relax and count on the resiliency of America and the power of capitalism to take place. I’m trying not to get too caught up in it but with a little imagination and patience, I actually see America coming out of this crises stronger and better than before. I do have some advice for you though, watch less news. Speaking of which you may have noted that last week I didn’t send the update, because for all practical purposes now the less news the better. I am reminded of the words of the wise man about what to do about a whirling dervish. “Just let it whirl”.
If you have questions or concerns about any thing in your financial world call us and we’ll get to the bottom of it.
Jeff Christian CFP, CRPC
Great champions have an enormous sense of pride. The people who excel are those who are driven to show the world and prove to themselves just how good they are.