We are absolutely in an unprecedented time right now and we hope you’re all safe and healthy.
As the Coronavirus pandemic continues, as well as fears related to this bear market, I wanted to take a minute to share a few things with you all.
As far as the market goes, there is a common theme that I’m hearing from smart minds, economists and Wall Street nerds and it’s this: A recovery will take place. The question becomes, will it be a V-shaped recovery (a sharp but brief period of economic decline that is followed by a strong, and just as quick, upturn), or will it be a prolonged U-shaped recovery (a longer decline and a more gradual revival)?
Many of you have even asked if it will be a W-shaped recovery (when there is a sharp uptick, but the market declines again before recovering completely). Often times, we refer to that middle point in the W as a dead cap bounce. Is this possible? Well, this happened in 2001, and also in that Bitcoin time period of 2017 to 2018, so this W-shaped recovery is quite possible.
Of course, the subsequent question we hear is, are we in the beginning of this or are we at the bottom?
Unfortunately, we don’t know. No one does. Anyone who has a crystal ball just ends up chewing glass. But what I can tell you is, do not sell at a bottom, and stay the course! These principals have rewarded those with emotional fortitude for hundreds of years.
We are here to help you during these difficult times. If you have any concerns about your personal portfolio, contact us! We’re working and available for you.
Will Stocks Go to Zero?
I know everyone is a little nervous and uncertain. There is a lot of noise. There are a lot of sensational headlines. There is a lot of “facts” to weed through.
While this is overwhelming for many people, turning a blind eye to everything going on is not the answer. There are two things to consider when you think about this market.
First, you need to ask yourself the question, is this bear market closer to the bottom or to the top?
And the second thing that you have to consider is, will companies like Apple, Johnson & Johnson, Amazon, AT&T, Costco and other large household names actually go out of business? Will their stock price go to zero? I find that highly unlikely. I’m betting on optimism. America is strong.
Again, there’s a lot of information circulating – and very quickly – about the Coronavirus, so it’s extremely important to know what you’re listening to and what you’re taking away from it all. What do you really need to know?
I want to instill all this information down into a few facts to better understand what is going on.
Markets Don’t Like Uncertainty
The first thing to understand is, markets don’t like uncertainty. And what’s driving the volatility in the market right now is the uncertainty about just how severe this virus will become and how it might impact global supply chains and thus, the global economy as a whole.
Now the simple answer to this question is that we just don’t know.
While this event may seem new and unique, it isn’t the first time the globe has dealt with a global health threat, and I dare say, it probably won’t be the last. We faced SARS in 2003 and Zika toward the end of 2015/moving into 2016. And the commonality with all of these events is how the market reacted, normally by overreacting and selling, leading to significant buying opportunities along the way. During a 38-day trading period during the high of the SARS virus, the S&P 500 Index fell by 12.8 percent, and during the Zika virus, the market fell by 12.9 percent.
Now how long this current volatility will last and how deep the market decline is anyone’s guess. But if we allow history to be our gauge, I am confident that the market will reach new highs again.
Remember, markets are cyclical. They go up and they go down. And sometimes the decline can happen quickly, which makes it all the more unsettling.
The fear of this pandemic has investors understandably concerned.
How Does the Coronavirus Compare to the Last Pandemic the World was Exposed To?
The last time the World Health Organization (WHO) declared a pandemic was in 2009 for a then-novel H1N1 strain of influenza. Research estimates that that virus infected about 1 billion people in the first six months alone and killed hundreds of thousands of people in its first year.
Of course, the number of cases of Coronavirus and the number of related deaths are still being reported. No one knows the full effect of this scary virus yet.
Please let me be clear: To see a life taken unexpectedly is sad, tragic and it’s not to be taken lightly. But the beauty of living during this day and age is that we can and are acting quickly. There has already been a drug identified that will help combat the Coronavirus, and it took only three months for this to happen. In comparison, it took 20 months to accomplish this same thing for SARS back in 2002 and 2003, so this is a testament to advances in scientific research and drug technology that we have available today.
In the meantime, it’s very important that we all do what’s recommended by the Centers for Disease Control and Prevention (CDC): Practice social distancing when possible, wash your hands thoroughly, wear gloves and a mask when possible and stay healthy.
New news about the Coronavirus is constantly coming in.
Hang in there. Think long-term.
The PAX Financial Team is working during this time, and we are here for you, not only to talk to you, but more importantly to listen. As always, if you have any concerns about how these events might impact your financial journey, talk with your trusted advisor and let him or her help you navigate the road ahead.
I appreciate your trust in PAX Financial Group. Remember, we are here for you.
This material is provided by PAX Financial Group, LLC. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The information herein has been derived from sources believed to be accurate. Please note: Investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results.