April 2020
Market Update

“Through this difficult, but ultimately temporary disruption, remember that your plan is designed to help you achieve your personal long-term financial goals.” 

First and foremost, we hope this letter finds you, your family and loved ones healthy and safe. 

At the beginning of 2020, market fundamentals were arguably as positive as they had been in years. Interest rates were low, the labor market was historically strong, the U.S. and China achieved a potentially lasting truce in the long-standing trade war, and the global economy was showing signs of acceleration following a sluggish 2019. 

But what a difference a month makes. As news of the COVID-19 pandemic swept the globe, market volatility surged in the first quarter to levels last seen more than a decade ago during the financial crisis. The swift spike in new coronavirus cases outside of China resulted in a sharp drop in stocks in late February. Those declines were then compounded throughout March as the number of active coronavirus cases in the U.S. began to increase rapidly. The S&P 500 tumbled more than 34% from the mid-February highs to the late-March lows, amid rising fears that “social distancing” measures being implemented globally to stop the spread of the disease, would have a broad and substantially negative economic impact. 

Across the nation, and the world, roads are mostly empty, office buildings are vacant, schools are closed and normal life as we have known it has largely ground to a halt as we wait to see where the virus “peaks”. 

Borrowing from its playbook following the Great Recession of 2008, the U.S. government has acted swiftly to support the economy as the Federal Reserve cut interest rates to zero percent and implemented several important measures to provide short-term cash for corporations and ensure there’s plenty of capital for the broader banking system. Congress also passed multiple economic relief bills, the largest of which was a $2.2 trillion stimulus package aimed at providing support for businesses and displaced workers. Those actions are working to help keep the banking and financial systems functioning in an orderly manner as well as supporting the economy through this unprecedented shutdown. Stocks reacted to these positive events by rallying sharply during the last week of March, although the major averages still finished the first quarter with large declines.  

We have created a resource page on our website in order to provide as much information as we felt relevant to our clients about the details of this stimulus, as well as ways in which you are impacted – from tax filing deadlines to support for small businesses. You can find this information HERE 

It’s important to point out that, as Fed Chair Powell stated in a recent interview, there was nothing “wrong” with our economy before the coronavirus hit. There was no tech stock bubble and no housing bubble, like we saw in the last two U.S. recessions. As mentioned, economic fundamentals were rather positive prior to this unprecedented shock, and that offers some comfort when we look at investing over a longer time horizon. 

To that point, it is also important to remember that this unprecedented market volatility, along with these societal disruptions, are temporary. At some point, the spread of the virus will peak and begin to recede. The biggest unknown will be the longer term damage to the global economy and we are certain to see some shocking statistics on unemployment and damage to GDP growth forthcoming. The world has come to an almost complete stop and it will take some over-sized efforts, such as the $2.2Trillion stimulus bill, to get us all back on track. The good news is those efforts are being made globally and without hesitation. 

Through this difficult, but ultimately temporary disruption, remember that your plan is designed to help you achieve your personal long-term financial goals. Meanwhile, shares of some of the most-profitable, well-run companies in the world are now trading at substantial discounts to levels at the beginning of the year, and history has shown us that over the longer term, these tumultuous episodes can create fantastic investment opportunities, and some of the most ideal buying conditions the market can offer. 

In your portfolios here you will see we raised a degree of cash as various models triggered risk-off measures. Some of this cash has been invested in ultra-short term bonds while we pause for volatility to subside and those models to signal an all-clear. We have been providing weekly updates to keep you apprised of developments but always encourage you to call or email with any questions or concerns. 

We will get past these challenging times, too. 

If you have questions, please contact us.

FINANCIAL PLANNING
COLLEGE AND TAX PLANNING
401(k) ALLOCATION
GRAPHIC OF THE MONTH

To download the April 2020 Newsletter: CLICK HERE