Broker Check

History, not headlines, may guide us through the moment

September 03, 2020
Share |

Coronavirus worldwide pandemic: has it brought any questions like these to mind?

  1. When will the virus be controlled and how many lives will it take in the meantime?
  2. How long will the resulting economic slowdown last?
  3. At what level will stock prices stop going down?
  4. When will we be allowed to dine again at our favorite restaurants or just go to the mall?

Well, you wouldn’t be human if you didn’t feel at least anxious if not downright fearful at this moment. Why not just end the present pain, escape to cash, and wait until everything turns up? Feeling anxious and acting on that anxiety are two very different things.

CAN HISTORY BE A GUIDE… OR IS THIS TIME DIFFERENT? Before you decide upon acting, consider the following:

  • 2008 – The Financial Crisis: no one had ever seen anything like it in our lifetime. Mass mortgage foreclosures and bank failures in a matter of months.
  • 2001 – The 9/11 Terrorist Attacks: no one had ever seen anything like it. The onset of World War III seemed to be upon us. The US stock market closed for a full week.
  • 1987 – On October 19th of that year, the US stock market fell further in percentage terms than on any day before or since. No one had ever experienced it.

HOW TO PROCEED: DO THESE STEPS MAKE SENSE?

  1. For the accounts you are thinking of/anxious about: do you need those funds today? Next month? Any time in the next year? (If you do – or even a portion of it – let’s talk soon about the account and your overall situation and make sure those nearer term financial needs are fully taken care of)
  2. The decline in the major uncertainties of the virus – not a perfectly functioning vaccine and zero active cases, but the waning of the growth in new cases, increasing numbers of those who have recovered, the resumption of life’s simple pleasures like making a dinner reservation or browsing the Spring fashions at your favorite store. When might those come to pass? A few weeks or months perhaps?
  3. On the Other Side – when whatever interval of time needed to arrive there has passed – will there be any particular obstacles to a recovering economy? Will gas prices and interest rates be low? Will Congress have spent a mind-numbing amount to support workers and businesses alike?

So… if 1) the funds aren’t those you will need soon, and 2) the uncertainties facing markets today will subside at some point, and 3) once they do subside, an environment favorable to recovery will follow… but we just cannot know when this will all exactly fall on the calendar… Would we be better off being patient and disciplined now, or should we attempt to precisely time when all of this will occur?

Another March, 11 years past, the S&P500 index in 2009 stood at 676.1 In that moment, the Financial Crisis seemed to have no end in sight. Today, after a rapid decline on the order of 30%, it’s fallen to around 2300 as of this writing.

As Warren Buffet is famously quoted as saying, “the stock market is a device for transferring money from the impatient to the patient.”2

May the coming warmth and budding Spring bring a smile to your face, a lift to your spirit, and patience in abundance. 

1‌ ‌‌CNNMoney.com‌ ‌
2‌ ‌‌https://www.brainyquote.com/authors/warren-buffett-quotes‌