I hope you had a wonderful Easter weekend. We had to be creative as our typical family Easter traditions, had to be adjusted due to COVID-19. Honestly, part of me was annoyed and defiant that our traditions were taking a “detour”. There are certain things you don’t mess with, and sacred family holiday traditions are one of them. I needed an attitude adjustment. There are a lot of things that have happened, taking me out of my daily “routines”. I spent too much time complaining about what I can’t do that I neglected to count all the many blessings I have right in front of me. My primary lessons through much of this has been patience, flexibility, and having a mindset of focusing on what is right, and not what is wrong. Having my entire family and all our children home around the table yesterday for dinner, made me realize that while the day was different, in certain ways it was better. The people that I love and care about the most, were healthy and right there with me. Life, COVID-19 or not, really does not get much better than that. I was fortunate to be in that moment and thankful that I did not miss it. (Attitude adjustment granted.)
The markets were in positive territory last week. The volatility did continue where the gains for the week, outweighed the losses. The Dow was up 12.70% and the S&P 500 was up 12.10%. The markets are also up for the 2nd quarter thus far; 8.30% and 8%, respectively.1 Last week, we provided you an overview of the CARES Act. For many Americans under $75,000 in income, we believe those personal checks will start being distributed over the next few weeks. For small businesses, we strongly recommend applying for the Payroll Protection Program (PPP) with your local banks. These loans can give you up to 2.50 times your average monthly payroll and may be forgiven under specific situations. While not experts on either of these programs, and things are changing frequently, feel free to call myself or Jon and we can help you understand more. We are hopeful as both the individual distributions occur and the business loans are funded, more positive favor may be in store for the markets. Time will tell for certainty.
The losses and downside volatility have not gone away, and more is expected. Since the CARES Act was signed into law, it is not known how fast the banks can respond and get these proceeds into the hands of small business owners. As the largest single government stimulus since the Great Depression, there are many details in deciphering the rules as things are implemented. While the government’s response has been swift, the question remains whether it is going to be enough. The US, and the world, have never experienced a pandemic such as COVID-19 in its history. As of today, the COVID cases in Arizona are not projected to peak until April 27th. What does seem clear, is many of the cases regardless of which state you look at, are expected to subside by June.2 As economists, analysts, and advisors, much of our decisions and direction is based upon historical facts. In cases such as this, where no data exists for such an event, people are forced to speculate or provide opinion. The next heightened level of uncertainty still looming is the Presidential election in November. While it is less about Republicans or Democrats, the closer the election becomes between the parties, the more likelihood of uncertainty increases. And, being fresh from COVID, we are not sure how the markets in general will respond.
Some of you have wanted to know, “When is the market going to bottom out signaling a good time to invest?” The truthful answer, we have no idea (and suggest you run from anyone that can tell you otherwise.) What we do know is thus far, the Dow Jones closed at “a” bottom during this current period of decline on March 23rd at 18,591.93. On April 11th that index closed at 23,390.77.3 Based upon historical facts; we can tell you when there was “a” bottom. However, we can’t tell you if that was “the” bottom. The Dow Jones has increased 25.81% since that market low. As stated previously, we are proud of all of you. Some of you have called needing reassurance and encouragement, and that is what we are here for. Very few of you, I can count them on two fingers, have made any changes to your investments or portfolios. We still believe that being IN the markets is better than being OUT. We do have a system and process based upon criteria we are watching. Not wanting to bore you with the details, we do see 75% of those criteria being positive at this point. Lastly, and probably most important as we have discussed with many of you, don’t get overly greedy in timing the markets. The Dow Jones is still down -20.84% from where it was at its peak on February 12th.4 Timing has a higher probability of being wrong than right. If you have cash to invest, get it invested soon.
I want to thank those of you who provided comments to my last Commentary. It was our biggest client response rate yet. Interestingly, it had very little to do with the markets and more to do with how to better cope with COVID. We each may have different amounts in the markets yet, we are all going through challenges with the virus and the personal impact it has on each of us, our families, and our businesses. One of those very common characteristics is fear. Fears about our health, our finances, our country, and the world. To help you overcome and manage these worries, here are some tips:
- Learn from It – Fear, in moderate doses, can be beneficial. On the morning of my Ironman races, I was afraid of all the many things that could go wrong in a 142-mile event. It helped me be prepared for that uncertainty, and upon the first stroke on the swim, the fear and anxiety subsided. Some fear is healthy if you don’t dwell on it and allow it to control you.
- Face It – To overcome any fear, you must confront it head on. Avoiding fear, only allows it more control over us. Over 90% of those with strong phobias are cured simply by facing their fears. On average, our fear is much worse in our minds, than it ends up being.
- Fake It Till You Make It – While fear often begins in our minds, research has shown that actions drive feelings as much as feelings drive actions. While you want to be honest, mostly with yourself, by “acting” a certain way despite how we “feel”, can propel us forward.
- Make It Meaningful – Crisis brings out the best and worst in human nature. There are more opportunities to serve others now, than ever before. Finding a way to get out of our own heads and feeling benevolent by helping others, reduces our anxiety and fear. At a minimum, it helps us keep our own lives and challenges in perspective.
- Connect – Oxytocin, a chemical released by the brain when we interact with people that we love, has shown to reduce fear. COVID-19 may have changed in the short term how we interact, but it is important to maintain strong relational ties. Find creative ways to stay connected. One of my youngest daughter’s friends, writes messages and draws pictures on the sidewalk for her friend across the street to respond to. What started in their driveways, is now down the sidewalk three houses long. Need to go take a picture of that.
- Take Care of Yourself – The connection between your body and your mind are powerful. Excessive caffeine or alcohol can amplify your fears and exercise and sleep reduces stress. It will also help us feel better about ourselves which reduces us obsessing on our fears. Your mind will only be as calm as your body allows.5
In closing, I have a request. We are doing our best to keep you encouraged, reassured, and make you aware of information as they change and impact you. Please respond and let us know if you find this information helpful as you each deal with these challenges. Share your inspirational stories so we can share them with others, send pictures, or provide your own lessons of learning during this time. We see you as our family and would like to develop our own sense of community as we all do the best we can under the circumstances. Thank you as always for your business and your continued faith and trust in our abilities. Please let us know if there is ever more we can do to help.
Pursuing Wealth, Wisdom, and Well Being Together,
Todd C. Martin
1 Amundi Pioneer Market Monitor (4/10/2020)
2 “Coronavirus State-By-State Projections: When Will East State Peak?”
3.4 Yahoo Finance
5 Brinker Capital Insights: “Overcoming Fear”