Note: This market review was published on March 25th, 2020 and may not be reflective of current market or investing issues.
I hope this finds you well. Jon Meacham, today on a news show, was referring back to the phrase in the Declaration of Independence: life, liberty and the pursuit of happiness. Certainly it is no coincidence that Thomas Jefferson put the word life first. As Americans, we find ourselves fighting two wars at the same time in our own backyards. If history is any guide, without prioritizing one over the other, we might very well lose both.
Obviously, the first war is the one against the Covid-19 virus, the one threatening our lives. When I wrote to you just two weeks ago, this virus was just getting started in the U.S. Now, while China and South Korea seem to have greatly contained the virus, the United States seems to be the new epicenter and on a trajectory steeper than that of Italy. This is as serious as it gets. We all have a collective responsibility to follow the guidelines set out by healthcare professionals, those doctors and scientists who have the training and understanding to see us through this. This may take three or four weeks longer and be much more inconvenient, but the lives of our families is certainly worth the price.
The irony here is that if we are following doctors’ orders, we make the other war, the economic crisis worse in the short term. Our government, as I write this, and most other developed governments are throwing everything they have in the way of stimulus at this problem, with little or no regard for sequencing or the longer term consequences. And while their efforts may not stave off a recession, their collective work should shorten a downturn and blunt its negative effects. To a large degree, that is what we have done with your portfolios: by creating a cash buffer, we have slowed the downside dramatically. That said, your March statement will still look pretty ugly!
Now the question is how do we get back into the market safely. This is a true, ferocious bear market, with huge swings both downward and upward. I wish I could say we think this is over. We don’t think it is, but we do think we are closer to the bottom than the top. In late March 2009, Jeremy Grantham of GMO fame put out a letter entitled “Reinvesting When Terrified”, and while we are certainly not terrified, putting money (risk) to work in uncertain markets goes against human nature. So be it; you will find us putting cash back to work strategically over the next several weeks and months, primarily using a dollar cost averaging rather than a lump sum strategy.
Again, as we navigate the pitfalls of the global markets over the coming months, should you have any questions about either our investing process, our thoughts on the economy or your own financial planning, please don’t hesitate to contact your advisor. If we all do our part, we will eventually get through this crisis. Many thanks for your continued confidence in Longview.
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