April 03, 2020
Your quarterly reports will be posted to your portal shortly. It has been a long time since we’ve seen these types of temporary losses. Keep looking towards the future. We will get through this together. Please feel free to get in touch with us – email is the fastest while we work remotely. We can set up a call time. Stay safe and healthy.
With so much gloom and doom every time we look at a news source, we wanted to provide some activities that can be fun. Below is a collection recommended by the staff at Financial Connections.
1918-1920: Known as the Spanish Influenza pandemic. It came in three waves. According to Bryan Taylor of the Global Financial Network, it affected 500 million people worldwide or about 27% of the world population.
1957-1958: H2N2 virus caused roughly 2 million deaths worldwide
1968-1969: H3N2 virus (aka Hong-Kong flu) killed approximately a million people globally
1997: N5N1 aka Bird flu – six deaths
2003: SARS (a version of coronavirus) spread to 12 countries and killed approximately 774 people
2020: COVID-19 Outcome yet to be determined
With the passage of the new stimulus bill, people who normally must withdraw from their retirement account may waive the distribution this year. We will be contacting you to see if you would like to proceed with your annual distribution or waive it in 2020.
How could we not feel anxiety, panic and/or fear? We are human and we have never been in the middle of a pandemic – the last one being the Spanish Flu in 1918. The daily market swings cause whiplash. The degree of loss, even though it isn’t the depth of the 2008-2009 decline – yet, is the fastest fall on record.
Part of the turmoil comes from the uncertainty of the pandemic’s ultimate impact on lives, health, and how long it will take to play out. Are we in the beginning, the middle or end of the process? How long will it take to get the economy back on track? None of us, be it the market or a person, likes uncertainty.
It might be better for many to skip looking at your accounts for the next few weeks. The losses are “on paper.” This means they may go up or down without a real impact. It is only when we sell a security that the loss becomes real. The proceeds are what you end up with and if sold, now a second decision is when to buy back in the market.
So, as in previous downturns over the last decades, allowing the losses to stay on paper improves the potential for the gains when the market moves on the upswing.
ESTABLISH A ROUTINE
STEPS TO HELP YOURSELF AND OTHERS
It seems to be a balancing act between helping others yet sheltering in place and vigorous handwashing.
We don’t plan to revisit all the coronavirus information you are already obtaining. Rather, we would like to offer some perspective on where we might be and where we might go.
There is a trade-off between taking steps for a positive outcome for people’s health and the economy. Having to shut down schools and many businesses around the world must obviously lead to a global recession.
The question then becomes for how long? It would seem that the longer the pandemic continues, the depth and duration of the recession will continue. And, by extension, the importance of people sheltering in place.
There seems to be a consensus that we are already in a recession. Joe Davis, Vanguard’s Global Chief Economist, believes the recession we are now in will be short but sharp.
Vanguard expects the decline in consumer spending as a result of social distancing to rival those seen in World War II. They believe the economic decline in the next quarter will be approximately 17% (annualized) – the deepest since the 1950s.
However, over the next 10 years, as a result of the lower stock valuations, they will have more room to grow generating better investment returns.