No doubt this is a scary time. This isn’t just a financial crisis, like 2008-09, this is a global health crisis crippling our economy. We are reminded daily of:
- New corona virus cases and deaths
- Reports of hospitals full and running out of supplies
- Unemployment rising and companies running out of money.
This is all real and should not be minimized.
However, we also need to recognize that we are making great progress and this will all end at some point. Our financial and economic engine is intact and when we neutralize the corona virus our economy – and stock market – should snapback relatively quickly. There will be some financial restructurings for sure, but restaurants and stores will reopen, people will go shopping, start travelling and return to work.
Today New York announced the closing of all non-essential business and yesterday California announced state-wide stay-at-home provisions (many states will follow this weekend). These are necessary and very effective ways to mitigate the spread of the corona virus. This is good news that demonstrates we are taking this threat seriously and addressing it head-on. I hope that we’ll look back and say we over-corrected; certainly better than not doing enough.
If you’re interested in some good news:
- China Hits a Coronavirus Milestone: No New Local Infections. A lot of caveats here: can we trust the data? Will the virus reappear as society moves back to normal? Nevertheless it is directionally HUGE. You can trust Starbucks and Apple, right? And they say their stores are open.
- Coronavirus spread is slowing – Says Israeli Nobel Laureate.
- Testing availability is picking up in the US, though still inadequate.
- US Government has demonstrated willingness to spend in the Trillions $’s to support economy.
- Christian Dior is making hand sanitizer and Tesla is working on ventilators. This may be more “feel-good” than game changing, but society is stepping up to the challenges.
- Search for Coronavirus Vaccine Becomes a Global Competition Governments and companies around the world are racing like never before to develop a vaccine and treatments for Covid-19.
- Finally. I think it’s important to maintain some context.
- 176 Covid-19 deaths in the US as of March 19.
- 23,000 – 59,000 flu deaths from October 1 – March 14. The following graphic is from the CDC’s website: 2019-2020 US Flu Season: Preliminary Burden Estimates | CDC
On to the markets.
During the 2008-09 financial crisis US Stocks fell 56%. As of today March 20, US Stocks are down 33%. There were reports today in the news that some big spending billionaires like Buffet and Icahn jumped into the markets.
Be Greedy When Others are Fearful, and Fearful when others are greedy – Warren Buffet
I love that quote. Way easier to say than do. History shows, systemic shocks to our economy are always followed by significant economic and market growth.
It’s very possible this is NOT the bottom and the market will go down more. A lot of people will be quarantined at home worrying over the next 3-4 weeks. However, it is likely the market will be higher 12 months from now than it is today.
Overall, the US Stock Market is down 34% (green line) over the last month. Our Big 3 trillion dollar tech companies: Apple, Amazon and Microsoft have held up remarkably well down between 15% and 30%. Netflix has really proved resilient only being down about 14% (makes sense right?).
One way of thinking about all of this is these stocks, or the whole market is “on-sale”. Now they could get even cheaper, but the real question to answer is will they go up eventually? There are a lot of companies that are really cheap, like Zillow, down almost 60%.
Also, this is a great time to fund long-term investments, like 529s and IRA. Maybe 401ks, but don’t fund too early and sacrifice employer match.
Can’t wait to see what next week brings.
Stay healthy and positive!