Market Commentary: April 2020
Market Commentary: April 2020
Right now, I can think of no better words to write at the beginning of this commentary than to tell you that among our families, your Grove Street Fiduciary team, and you, our clients, we have not learned of anyone diagnosed with COVID–19. For that, we are incredibly thankful! At the same time, we know that many are impacted in other ways, including being socially isolated, losing income from work/business, enduring the challenges of working remotely, or in the case of our frontline healthcare friends, risking their lives every day working longer, more difficult hours than usual. From those of you who are lonely and isolated to those who are working overtime, your courage and temerity are inspiring! For our part, we really miss seeing you in person and look forward to returning to normal, whatever that looks like.
Even as there are discussions of the diminishing threat of the virus, economies restarting, and lockdowns being lifted, you may feel like you are “all stressed up with nowhere to go.” This is certainly a strange and isolating experience, and many of us will emerge describing it as life changing. We are living history in a global pandemic and national lockdown; there is no playbook for what we are doing. Although every recession is unique, the speed with which this one has developed and its cause, a pandemic, has no benchmark. And of course, we do not know if the market low is already behind us or is still ahead.
It is an understatement to say that the quarterly performance stands in sharp contrast to last quarter. Double-digit returns for any quarter are historic, let alone in the negative direction. No stock asset classes were spared; the Dow, S&P 500, and Nasdaq all lost at least one-quarter of their value since closing at record highs in February. In the case of the S&P 500, it took only 23 days to fall 34%. There were moments of relief, but these were also historic. In particular, on March 24th the Dow recorded its biggest point and percentage gain since 1933, closing up 11.4%, or 2,113 points. Meanwhile, businesses cut output and jobs at the fastest pace since the 2008 global financial crisis. Only China saw a slight rebound in activity as its economy restarted, having been the first hit. Bonds were the only assets that provided breathing room, proving yet again their importance to stabilizing your portfolio and securing your short-term income needs.
Even if the stock market low is behind us, which is far from certain, the economic pain and unemployment figures are expected to worsen in the next few months, so brace yourself. Knowing that over the past 60 years it has taken an average of about two years for markets to recover from a recession’s low to its previous peak, we expect this one to be average or end even sooner. For our part, we have made sure that you are in a financially strong position to make wise decisions. In advance of the recession, we braced your portfolio to provide flexibility that we are using now and will continue to use over the next few quarters. Based on your personal circumstances, we are working to capture every opportunity, from rebalancing bonds to low-priced stocks and performing Roth conversions, to ensuring you benefit from provisions of the recently passed legislation.
Though pessimism can somehow feel closer to realism at times like this, when it comes to investments, the unfashionable optimist is not necessarily naive, foolish, or unseasoned. Historical evidence favors that view. In the same way we are seeing the creativity and irrepressible good that people are making out of this unprecedented adversity today, capital markets are doing the same. Businesses will continue to innovate, solve problems, make life easier and more enjoyable, and as a result, grow – and so will your portfolio, albeit in an unpredictable and highly irregular manner.
If you have a moment in your lockdown, I recommend this encouraging 9 minute TED Talk video, “Embrace the Shake.” Enjoy. There is nothing about the stock market in it. https://www.ted.com/talks/phil_hansen_embrace_the_shake
We hope you remain healthy and safe. Please let us know how we can help and as ever, thank you for your trust.
“People often overestimate what will happen in the next two years, and underestimate what will happen in the next ten.” – Bill Gates
Carl Amos Johnson, MBA, CFP®, AIF® April 20, 2020
Grove Street Fiduciary, LLC Wealth and Trust Advisors