This is a special note to clients, family, and friends, which are not mutually exclusive. Our lives have changed dramatically. In one month, we went from a U.S. stock market at an all-time high, record low unemployment, and packed social gatherings, to this.
The event we’re going through is truly unprecedented. While I’ve spoken with almost all of you individually, I wanted to check in with some good news, a reminder of our grit, and some gratitude.
Good News
“Good news is rare these days, and every glittering ounce of it should be cherished and hoarded and worshipped…like a priceless diamond.” – Hunter S. Thompson
To help explain what’s been going on in the markets, I’m providing some visuals. I don’t mean to get technical, but stay with me, because the following will help put things into perspective.
The recent Coronavirus stock market selloff happened fast. In fact, it was much faster than the stock market declines in the Tech Bubble (blue) and the Global Financial Crisis (red), as shown in this Bloomberg graph, below:
We haven’t experienced stock market volatility (the up and down of the market) like this in quite some time. I’ve been drawing analogies between recent stock market volatility and what the stock market experienced in 1987 because that’s the last time stocks sold off with such magnitude. My friends at Ycharts provided the following graph, which compares daily percentage moves of the S&P500 in 2020 (orange) to 1987 (blue):
Yes, you are seeing daily moves of high single and even double digit percentages, both up and down. This is unusually high, even for periods of heightened volatility.
As you can see, the S&P500 traded with noticeably lower volatility for months before spiking significantly over the last month. This volatility is truly historic – and unnerving.So, what’s the good news? There are actually three points of good news.
The first is the recent launch of a “Wall Street” stimulus by way of the Federal Reserve cutting rates and engaging in various monetary policy measures. While the term “Wall Street” prompts less-than-stellar thoughts from many, the reality is that the banking system needs a lot of cash (“liquidity”) and needs it to be cheap. This is to help businesses survive until the Coronavirus passes – hopefully, much sooner than later.
The second is a “Main Street” stimulus from Congress, known as the “CARES Act”, which was just passed last Friday. This will get much needed cash into the hands of millions of Americans to help them pay their bills until they can return to work.
The third point of good news is that the stock market has rallied markedly in response to the above. Last week, the Dow was up more than 12%, which was its largest weekly gain since 1938.
Where we go from here will likely depend on the impact these two stimulus packages have on our economy, and how soon Americans can get back to their jobs. Time will tell, but the Fed has more tools that it could use, and Congress may offer more Main Street stimulus.
Grit
“But it is a blessed provision of nature that at times like these, as soon as a man’s mercury has got down to a certain point there comes a revulsion, and he rallies.” – Mark Twain
It’s amazing what we humans have made it through. Think back to the various crises we’ve successfully endured: MERS, the Global Financial Crisis, the swine flu, SARS, September 11th, the Tech Bubble, the 1987 stock market crash, and the Great Depression, just to name a few.
While we are in a period of marked uncertainty, I’m confident we’ll make it through – together. Our grit helped us weather challenging times before and will get us through Covid-19. This is a time for gratitude, which brings me to the last point.
Gratitude
“What counts in life is not the mere fact that we have lived. It is what difference we have made to the lives of others that will determine the significance of the life we lead” – Nelson Mandela
The Barse family just celebrated Delaney’s big numero uno. We were lucky enough to have a small gathering of family, all of whom were able to safely return home before the shelter in place mandate. We are so thankful for our little bundle of joy and hope you join us in smiling at this photo:
As we progress though these uncertain times, let’s emphasize gratitude for the people who are most important to us, and that which we can control: our attitude. In due time, the Coronavirus shall pass, and we will succeed. Stay healthy and safe, my friends.
In gratitude for all of you,
Vance
D. Vance Barse, AIF®
Wealth Strategist & Founder
Your Dedicated Fiduciary®