To say that a lot has changed in the last month is the understatement of the year (or perhaps even a lifetime). The COVID-19 situation has caused a constant flow of even more negative, heart wrenching and depressive headlines and articles flowing from media outlets across the globe. I would recommend that you avoid immersing yourself in that sea of despair as it’s virtually impossible to constantly think negatively and live a positive life. It’s wise to stay informed and OK to be worried, as without fear there is no courage, but don’t let what’s going on now cause you to lose hope.
Smart investing has always involved risk so in any circumstance intelligence in combination with courage is required. At market tops, intelligence is typically paramount to find the best values amidst the overpriced. At the bottom of markets, courage is typically paramount to recognize that things will eventually rebound and invest broadly to take advantage. In the case of 2020, I think we are in a slightly more unique situation where we need both the courage to have faith that the US and the globe will get past Covid-19 and the economic and social impacts in its wake, AND the intelligence and insight needed to see how the world has changed and to target those areas best equipped to handle the turbulent water caused by social distancing and to thrive on the other side.
We all know Social Distancing, while done in an attempt to avoid overwhelming the healthcare system, will cause economic damage. The US (if not the globe) will probably go into a recession this year. Unemployment is probably going to increase sharply and earnings (especially in tourism, restaurants, entertainment, etc.) will likely be much lower in the near term. Those expectations should come as no surprise but they are “the WHY” behind the S&P 500 previously falling some 34%. It’s bounced off those lows as I write this, and it’s likely going to continue be a bumpy ride as all this gets sorted out, but I can’t stress enough that markets mostly move based on changes to what is expected and less so on what’s already expected just playing out over time. That’s why we always say to keep your focus on 3 years from now and not 3 months from now.
I’m sure you’ve seen the 2.2 Trillion dollar stimulus package that was passed as that’s hard to miss, but love it or hate, that’s going to have an effect. That’s why it was done and the idea is to soften the blow to the economy during the downturn and add fuel to the fire when things turn around. The details of the package are too much for an email but here are a few key areas:
Paycheck Protection and Small Business Relief
Recovery Rebates for Individuals
Penalty-Free Distributions from Retirement Accounts
Temporary Waiver of RMDs
Relief for Student Loan Borrowers
Support for Impacted Industries/ General Economic Support
The Fed is also pulling out the stops with low interest rates and aggressive monetary policy and let’s not forget how amazing our nation is at adaptation. Anyone had a web meeting recently? Watched the tonight show filmed on a cell phone? If you are worried about small business, there is relief. Worried about unemployment? There is assistance. Individuals? There are rebates. There is no magic pill in any of that, but all those things are cumulative and effective and just need some time.
Remember faith doesn’t have to be blind.
Faith in this case is using the full weight of the history to know that we’ve overcome all previous obstacles, trials, and tribulations as a basis of confidence that ‘this too shall pass’. We can’t have all the information on the virus, and we can’t know for certain what the future holds, but the vast majority of evidence points to a rising sun even after the darkest of nights.
We are in your corner. If we can help with anything, please let us know.
Brad Hudson, CFP®, CIMA®, AIF®
CERTIFIED FINANCIAL PLANNER™ | Certified Investment Management Analyst℠ | Accredited Investment Fiduciary®
5129 Oleander Dr., Suite 202 | Wilmington, NC 28403
910.399.7765 • 1.888.588.0878
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