Market Alert 3.12.2020
For those that don’t want to read a lot – do not make any changes to your investments. If you are upset, as we all are, do not look at your accounts. The market is very close to dropping to the bear market level, meaning down over 20% from its recent high.
I have been asked about my feelings as an investor. I am very upset with the current situation, but I am terrified that if I touch anything, I will break it. I have watched the markets for years and have seen every terrible market in the past 20 years from the high, to the low, and back to new highs. Making moves during these volatile times has never proven to be in the investors best interest.
It appears the coronavirus also affects the brain activity of many people. It has created a level of hysteria that hasn’t been seen before. Companies and organizations around the globe have all adopted a new mantra/policy: “in an abundance of caution…”. If you receive an email, memo or communique that begins, “in an abundance of caution…” you are about to be told something is being postponed. In an abundance of caution the U.S. is being shut down so people don’t get infected with the coronavirus.
My problem with the reporting on the coronavirus is the total lack of context and concrete facts and the absence of substantial facts. The coronavirus appears to be more contagious than the seasonal flu and other past widespread viruses, but the mortality rate appears to be lower than other past widespread viruses. The fact is the mortality rate is not known because the number of people affected with the coronavirus is not known because a large percentage of people who have been infected didn’t know it and/or didn’t get very sick. Tom Hanks and his wife have the coronavirus and told the world about their mild symptoms on Instagram: slight fevers and chills. To date, unfortunately 38 people have died from the coronavirus. All were elderly and/or very ill already.
Here are the statistics from CDC regarding the estimates for the seasonal flu this year: (https://www.cdc.gov/flu/about/burden/preliminary-in-season-estimates.htm)
Could you imagine if the media reported these numbers every day?
Unfortunately, the problem is now clearly the overreaction and overreactive response. In an abundance of caution of people getting the flu, activities all over the country are being postponed. Initially the economic impact was feared to be with the supply chain out of China. Inventories have shrunk due to the closure of factories in China, but capacity is improving, and inventories will be brought back to normal levels this year. Now the problem is the impact of the all the cancellations and postponements of group activities here in the U.S. Many of these events are postponed and will go on when the virus subsides. And it will. Even Eboli subsided. The postponements will cause consumers to spend differently, but not to stop entirely. The coronavirus is a temporary event and the effects of the virus itself are temporary. Unfortunately, some the negative economic impact from the response may be more long term.
The market has recovered from all the past pandemics in six months. I fully expect the market to recover from this drop. Trying to time the market, during a good time, is very difficult. And not prudent during these times. If you touch anything right now, you are likely to break it. Please be patient and steadfast. This time next year we will all be looking back with wonderment at the way the world reacted to the coronavirus.