Our March 30, 2020 Client Newsletter contained important information we’d like to make available here on our website.
During the past several weeks I have reached out to a large number of clients, family and friends. It comforts me that almost universally, those I spoke with are closely following the government guidelines to stay safe and help control the spread of the coronavirus. My staff and I are working from home and making excellent use of the available communication technologies most people have access to today.
Just a little over a week ago the headline of the Wall Street Journal was, “U.S. Virus Cases Surpass 10,000,” but now we are approaching 150,000 cases. On Friday the headline read, “U.S. Virus Cases, Jobless Rate Soar” as a record 3.28 million Americans filed for unemployment. But, also during the week, there were some positive headlines too. On Wednesday, “Dow Soars 11%: Best Day in 87 Years.” And, Thursday’s headline, “Trump Signs Record Stimulus Bill” reassured many investors as the government is making it clear that it will do whatever it takes to help restore the economy once the coronavirus is under control. There is already talk of another economic stimulus bill being considered.
It is easy to understand how our emotions can reach extremes in a time like this. For many, it’s hard to imagine things getting back to normal or the way it was just a month ago. Some people have applied for unemployment for the first time in their lives after working continuously for 20 or more years. Successful businesses have had to lay off loyal workers as revenues have dropped significantly or to zero in some cases.
Experienced Historical Perspective
In my 26 year career as a financial advisor and portfolio manager, I have experienced two prior crises where the markets dropped more than during this past month. The first major crisis was September 11, 2001 which occurred during the bear market which started in March of 2000 and the other was the financial crisis which started in 2007. The U.S. and global markets have encountered countless other crises and incidents that have created temporary disruption and widespread concern.
These situations always end and better days have always dawned. Some are asking why the markets are moving up in the past week when the news is so negative. History shows that the markets move up in anticipation of better days rather than waiting for the news to confirm that things are better. During recessions, the markets often gain value well in advance of the end of the recession. There is risk in investing during volatile times as the future appears uncertain. However, continued investing and even adding to investments during times like this have proven rewarding in the past as valuations are depressed and waiting for the news to be all positive can lead to reinvesting at elevated price levels.
In the past week, many of the CEOs of the major companies held in our portfolios have been interviewed on the top business and news channels. It is encouraging to hear of the hard work being done by so many companies to start making medical equipment or protective gear thus helping to alleviate any shortages. Many pharmaceutical and medical technology firms, including some that we own, are directing much of their resources to develop therapies, vaccines and testing for COVID-19.
Some companies are hiring in record numbers. Amazon is hiring 100,000 people and raising wages by $2 per hour to reward their employees and keep things moving to satisfy overwhelming demand with so many people remaining at home.
We can also take confidence when executives at major companies buy stock in their own shares as they did at companies such as Wells Fargo, Citigroup, Cisco, Disney, Facebook, Eli Lilly, Procter & Gamble, Raytheon, Starbucks and Exxon, among others, all in the past few weeks. Overwhelmingly, these large companies and many others have the balance sheets and cash to maintain their dividends during this crisis. When questioned during their interviews, the CEOs of the companies we own affirmed their commitment to paying dividends.
A Few Suggestions
At a time like this, it is not healthy to watch the news constantly. Most news channels are filling airtime by keeping tallies of the numbers of cases and the death toll in the U.S. and around the globe. No one needs an hourly or even daily update of these numbers. We know that the peak is not expected in the U.S. for at least a few more weeks and the number of cases will continue to increase.
To make the best of our current situation, experts suggest keeping a daily routine, especially if you have kids at home. It’s important to maintain healthy eating habits and keep up your exercise. Read a book, do a puzzle, play a board game, or get an early start on spring cleaning or any other useful project. Keep your relationships strong at home and remotely.
One great idea shared with me by a senior client is keeping a journal of the crisis to share with future generations. This client’s friend journaled about the major events of her life including the JFK assassination, September 11, Nixon’s resignation, and more. I suggested this idea to my oldest child who’s 14.
A neighbor of ours started a project to make protective masks for the workers at the local hospital and so many pitched in to help, it made me smile. I have heard of countless similar projects being done all over the country. We always come together to solve our country’s and our world’s toughest challenges, just like we see happening now.