New growth is beginning…
This is a hard time to be an investor. It has been easy for a long time, long enough that many people have become complacent and forget that investing isn’t all rainbows and sunshine. And this moment in time, when uncertainty seems to be highest, is exactly the time to commit to your investing convictions and strategy. The same strategy you’ve had for the 3 months ago.
It is easier than ever, with the technology at our finger tips, to get lured into the media trap that perpetuates fear. This time is different than last “time”, our economic engine has never been throttled back like this. A lot of small businesses are looking on, unsure if their doors will remain open in the next week, month, year.
I remain optimistic for a two big reasons: 1) as Americans, we come together in times of crisis to lift each other up, and 2) it is clear that our government is willing to do what it takes financially to get us through these uncertain times.
The results of our current situation will likely play out over the coming months and years, with major changes to our healthcare system. The efforts our world is taking now to slow COVID-19 down are extreme and we know these efforts are necessary, but they also have come at a cost.
Global economic growth and the US economy has slowed drastically. US stocks have entered a bear market. Big stock market moves, both up and down, have become the norm. The yield on the 10-year US Treasury note has fallen to an all-time low, making borrowing cheaper—but challenging savers. In short, this has been a challenging period for many long-term investors, and you’re asking what’s next and what to do.
Out of necessity,
global central banks and governments are doing what it takes to support their economies and stock markets. In the United States, the Federal Reserve (Fed) lowered its policy rate by a full percentage point, the first move that large since the savings and loan crisis, bringing the rate to a target range of 0–0.25%. The full impact of lower rates will likely have to wait until loan demand picks up, but other Fed actions may provide more immediate support to help financial markets continue to run smoothly, bolster short-term funding, and increase market liquidity.
At the same time, the US government already has passed big measures to support the economy, and it’s currently working on a major fiscal stimulus bill approaching $2 Trillion (far surpassing that of the financial crisis’ stimulus package). Discussions are still taking place, but provisions possibly include paid sick leave, expanded medical testing, unemployment insurance, direct financial support for consumers, and relief for some of the most heavily impacted industries.
Do I sound like a broken record?
It can be difficult to keep looking forward with so many unanswered questions right now. For long-term investors, it’s important to maintain a clear vision of financial goals and the plan for getting there. Answer this question to begin growing: How can you be proactive right now? Let me hear about this!
Market volatility like we’re experiencing now may provide pockets of opportunity for suitable portfolios. As a recession increasingly is priced into markets, stock market valuations relative to their earnings power and to bond yields have become more attractive. Current uncertainty means taking a careful, measured approach, and for some investors there may even be small ways to consider taking advantage of these potential opportunities.
I’m hopeful we will see an economic rebound later this year and into 2021 as the outbreak is contained, businesses reopen, and fiscal and monetary policy support expands. The US economy and corporate America have steered their way through world wars and cold wars, financial crises, and geopolitical events. Through even the most challenging times, markets have found their way back to normalcy, and investors have been able to look to the future. We will do the same this time.
The Silver Lining
A silver lining remains, I feel more connected and thankful to/for family, friends (new and old), my church, fellow business owners, hospitals, first responders, a civilized structure to deal with a pandemic, and the global community.
I have enjoyed spending more time with my family, not rushing out the door each morning into our busy schedules; seeing my kids learn as we also learn how to home school. I’ve witnessed more meltdowns and temper tantrums, and struggled to understand my own.
It seems like we’ve been in a slumber of economic prosperity the last 5 or 6 years. We’ve had enough for a long time, we’ve had excess for a long time, now we are reminded how liberating it can be to cut out the excess. My hope is that we can lift up those who are most damaged in this time.
New growth is beginning…
within each of us now. We’re all struggling to make sense of this situation and with how to go about life’s daily tasks. The financial and economic loss is hard, but nowhere near as hard as the loss of a loved one. Right now we owe it to each other and to our communities to do whatever is necessary to succeed in the long run.
Trust your plan, be well, and please contact me if you have any questions or concerns.