Note: This market review was published on March 9th, 2020 and may not be reflective of current market or investing issues.
Erik Larson has just released a new biography of Winston Churchill entitled The Splendid and the Vile. It documents the one year from May 10, 1940 to May 10, 1941, the period in which Nazi Germany overran France and began the bombing of London. During this perilous time “Churchill’s great trick was his ability to deliver dire news and yet leave his audience feeling encouraged and uplifted”.
There is an investing concept we first heard during the 4th quarter of 2008: “the permanent impairment of capital”. During that recession, where the S&P 500 fell 50% over 18 months, this concept was loosely defined as losing no more than 20%. We feel it is imperative to protect capital when it is called for and especially not to injure financial plans so much that they may never recover. While the S&P 500 recovered in four to five years, it did so from a base of inexpensive equities and much government stimulus. This time around equities are expensive, bonds even more so and global central banks have spent most of their stimulus. We have been de-risking all of our managed portfolios since late January, from only 7% for aggressive accounts to 39% for moderate accounts. So going into this Coronavirus crisis, we felt we were reasonably prepared, but its effect on the U.S. economy may be deeper than we thought. That said, the Covid-19 crisis may dissipate quickly over the next three to four months if China and South Korea are any indication. But it also may leave our economy, along with other global economies, in a much weaker state, much more so than even at the turn of this year.
As we navigate tough markets over the next several months, should you have any questions about either our investing thesis, the economy in general or your own financial planning, please don’t hesitate to contact your Longview advisor. We try to build resiliency into our portfolios and planning for times like these, and while we might not have Churchill’s knack for encouragement, this crisis will also eventually pass us by. Many thanks for your continued confidence in Longview
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