Commentary from Ronald E. Lang, Principal
This note doesn’t need to make you aware of the COVID-19 (Coronavirus) and what it has done to our lives, economy and our futures. We wanted to address some economic, stock market and general investment planning concerns. We as humans are driven by our emotions, both good and bad. Right now the core emotion is “fear” and fear breeds more fear as we talk to our colleagues, friends and loved ones. We are so used to living our lives and going through our routines that it takes something like a death to a family member or a loved one to realize we are only on this earth for a short period of time. A death usually grounds us and makes us focus on more important things in life. COVID-19 is having a worse effect on us than a death because we can grieve, take stock in our lives or perhaps redirect our focus and then move on.
COVID-19 is shutting us down. No other way to say this. No other way to find a silver lining or provide a metaphor to calm your emotions. Being realistic, we may be shut down for 8-12 weeks at the minimum, probably up to 16 weeks. This is my (Ron Lang’s) opinion only. Filtering out the rhetoric (which there is A LOT of) and listening to the true experts in the field, not opinions of people that have cursory-level expertise, that is a realistic timeline. The politicians are being smart by not giving an exact number of weeks. The reason why, they don’t even know. This is truly uncharted territory, but we must restrict the spread of the virus by self-quarantining yourself, that’s it. While you are self-quarantining, if you have symptoms, get tested immediately. More testing will be available as each week progresses. If your test comes back negative that you don’t have the virus, that doesn’t mean to back to your normal lives because you can still contract the virus.
CDC.gov has a lot of good information:
If you feel that you are invincible or impervious to COVID-19, you aren’t! Be smart, this will take time and it will pass.
The market has pulled back on average across the indexes around 30%. Those of you considering retirement within the next 5 years should have allocated your portfolio accordingly many months ago, but don’t make rash decisions right now. Investment and trading should never be emotional as those decisions are usually always wrong.
If you have a 401(k) or similar retirement plan or account, you should be “adding” to that account now. Averaging down will only compound returns to the upside in the future. Smart investors know this and you should always follow the smart money. If your time frame is 10, 15, 20 or more years before retirement, take a deep breath, history tells us the market will be higher in the future and the American economy will always lead the way. We have better technology, survival skills and entrepreneurial spirit than any other country in the world. Six months, one year or 18 months from now, COVID-19 will pass, we will be stronger and the stock market should be higher than it is today.
Personally, I’ve had dozens of conversations with clients, colleagues, friends and family over the last three weeks about COVID-19 and investments. My common theme is to stay the course. If you are in quality investments, add to those positions at a depressed level. If you are an income-oriented investor, your key investments should be safe since the government is going to bail corporations out so they continue to pay people, key expenses and their debentures (both Bonds and Preferred Stocks). As long as they are high-quality, blue chip companies, especially the big banks, your dividend and interest-income is most probably very safe.