Since World War II, there have been 11 U.S. economic recessions, 12 Bear Markets, and 23 U.S. equity market corrections of at least 10 percent. The catalyst for these declines includes geopolitical events, terrorist attacks, credit market collapses, and various asset bubbles, among others. The underlying cause of a significant decline in economic activity or equity market prices changes throughout history, but the stages we experience through those declines remains the same. As we have mentioned often in past commentaries, Uncertainty for the equity markets leads to Fear, which ultimately results in significant short-term volatility and temporary price declines. These events are, in part, exacerbated by the relentless barrage of media sensationalism.
The Coronavirus is an infectious viral disease that has the ability to spread quickly resulting in mostly mild to moderate flu like symptoms. On rare occasions, currently roughly 3 percent of the time, it can unfortunately lead to loss of life. The disruption to economic activity, however, is not necessarily due to the virus itself but rather choices made by governments, corporations, and other entities to help combat the spread of the virus. We know that China was the first nation to deal with the virus and after taking measures that included shutdowns and crowd avoidance they are now returning to normal activities and the discovery rate of new cases has declined. Therefore, it is reasonable to expect that once the virus has been appropriately contained, normal economic operations in the U.S. will resume.
Our philosophy and commitment to helping you reach your goals remain the same as they were 40 years ago when our firm was founded. It is important during times such as these to rise above the noise, take stock of the situation, and apply our knowledge of past and present investment markets to make prudent decisions that are in your best interest. Having an established financial plan along with an investment portfolio aligned with your needs and comfort level provide the foundation for navigating declining equity markets. The diversified nature of your investment portfolios is helping to provide stability to current valuations and may ultimately provide opportunities to rebalance monies to equity mutual funds at very attractive prices. Additionally, for those of you that currently have monthly withdrawals, rest assured you have years’ worth of withdrawals in cash or fixed income (fixed income has seen an increase in value during this recent market turbulence).
It should be expected that uncertainty will continue to prevail while governments around the world work to combat the spread of the Coronavirus. During this time, equity markets will experience significant volatility as normal economic activities are disrupted. We will continue to monitor the investment markets, money managers, and your portfolios and make adjustments that we feel are best for your individual situations.
On a separate note, our firm has historically contemplated various types of disruptions to our daily operations and services. As such, we have previously incorporated technology, processes, and procedures to ensure that there will be no interruption to the services we provide to you in situations such as these. Additionally, we encourage any clients that are scheduled for meetings in the next several weeks to contact us if they would rather delay or conduct meetings via online conferencing.
We greatly appreciate the trust you have placed in us over the years and look forward to many more years to come. Please follow the CDC guidelines regarding protecting yourselves and minimizing the spread of the virus. We all wish you the very best of health during this time.
The Lesjak Planning Team