The novel Coronavirus is the lead story in virtually every media outlet, so we are all aware of its widening presence. Further escalation and imposed work and travel restrictions will have impact global economic growth, which is what the markets are attempting to price in today.
After today (Feb. 28) the S&P 500 Index® has given up 11% of its value in only one week. An unprecedented sell-off, even taking 2008 into consideration.
While no one can predict the scope of infections, it is important to realize that fear of the unknown is driving this decline. Whether or not the virus leads to the global economy essentially grinding to a halt, the market is acting as if it will. Such violent selloffs have historically exhausted themselves and recovery from occurred quickly, as the worst-case scenario usually fails to materialize.
We aren’t attempting to predict the unknowable. Yet until facts support such fears, we believe the market is well ahead of itself pricing severe losses. As spring approaches and the virus plays itself out, we expect the markets to mount another V-shaped recovery. We can’t say how much farther it may fall in the meantime or how long it may take for the recovery to come.
We appreciate our clients’ restraint in calling us during this episode (you can read why below) but we know it’s on everyone’s mind, so know that we are well-aware of the threat that the virus poses to everyone’s health, the economy and the markets. Yet today it is fear driving markets rather than fact and we encourage you not to succumb to it.
Our client portfolios are built to protect near-term liquidity needs from such events. Should this process prove to be several years, we will not be forced into surrendering longer-term growth objectives at inopportune prices today. Clients are structurally protected from market upheavals, providing clients some peace for living life the way we planned for it. So please, go live life. But do be aware of your surroundings, unapologetically distance yourself from sick people and take the precautions recommended by health officials.
To that end, we are doing our part to protect against the spread of the virus. Until it fades, we are asking that all meetings and discussions that do not require a physical presence be conducted by phone or video conference. We don’t wish to be or become part of the problem and will certainly be personally available as necessary. So please, use good judgment as we will and if we can handle your needs remotely it may turn out to be best for everyone.
Thanking you all.