When I was younger (a long time ago), I was told there is a Chinese curse: “May you live in interesting times.” I think it is ironic that this interesting time originated in China last November. We will all remember 2020 as the year of the COVID-19 pandemic. Regardless of when the lockdowns end and we can get vaccines and not worry about separating by six or more feet, this will have an end. Even though most of us are working remotely and trying to avoid contact with others, we are still able to work and help our clients through this crisis. With the “emergency” funding bill coming out of Congress, many small businesses will be able to weather this financial storm if it can be controlled by mid-summer.
The markets have had the largest and steepest fall since 1931, yet as we started to see some certainty about the outcomes, the markets have also rebounded faster than even I expected. This is the reason I have continued to say that the best option for clients is to stay invested. By missing a single day of 7-10% increase, a client can miss as much as 40% of the total recovery of the equity markets. Just as we saw in 1987, the only people that saw losses on their stock market investments were the ones that got out either near the bottom or too early in the recovery. It is our responsibility to help our clients wait out this storm. I still believe we will see most of the recovery in the markets by year end. I believe that sometime in the future that if we look back at the beginning and end of 2020 and don’t take into account the interim market volatility, it will look like a pretty flat year. Those of us that are living through this time will always remember that this has been scarier than any other time in our lives. Not only do we feel the fear of the markets and what that has done to our retirement savings, but we have also learned to fear for the lives of our families, friends and ourselves.
For the first time since this started, I would start to invest into stocks with a medium term time horizon. I expect that in 3 years, we will have seen the markets eclipse and exceed their previous highs. The correction that everyone has been expecting came in and turned into a bear market in less than 60 days. This completely changed where we were at the beginning of the year and will lead us into the continuation of the secular bull market that should last another 3-5 years. I believe this will last longer than the historical markets again because there is more money looking to be invested than at any time in history. We all know that all of the world’s central banks have been lowering the interest rates they can control, but according to former Fed Chairman Ben Bernanke, we have been in a long-term decline in interest rates since 1982 because we have more people living longer with increasingly more savings. As more of those savings dollars try to find a safe place to go, there is a supply-demand imbalance that will continue to develop just as it has in Japan. With rates at or near zero and potentially negative, more money will continue to “leak” into stocks and that will help to maintain the demand for an indefinite period of time.
This is the most important time we have had to stay in contact with our clients and help them position to take full advantage of our current volatile times. Be well, stay safe and God bless!
Dave Wickersham, CEO