Well, that was quick. Feeling good after a strong finish to 2019, we’ve seen some dramatic changes happen in a very short period of time. Let’s call it the “Coronavirus Contraction”. It came swiftly, and it came with force. And while the economy was on a roll to start the year, in a matter of weeks, we were looking at a lot of red. How long will these clouds of uncertainty remain overhead?

Let’s first look at how some of the major metrics fared:

Index	1st Quarter	1YR
S&P 500 Large Cap Index	-20.00%	-8.81%
S&P Small Cap 600 Index	-32.94%	-27.09%
S&P Developed BMI International Index	-22.53%	-13.74%
S&P U.S. Aggregate Bond Index (total return)	2.48%	7.38%
S&P Municipal Bond Index (total return)	-0.58%	3.78%
Dow Jones Equity All REIT Index	-24.02%	-18.82%
Dow Jones Commodity Index (spot return)	-27.15%	-24.65%

Click here for a comprehensive list of index returns

Source: Dow Jones, data as/of 3-31-2020 (doesn’t include dividends unless noted)

Looking at the market returns, there was little place to hide. One could make a case this was one of the worse quarters ever. Goodbye, and good riddance! Specifically, the S&P 500 fell ~35% in just five weeks (February 19 to March 23). We went from the longest-tenured bull market in history, to a sudden bear market (bear markets are defined as a pullback of 20% from recent highs).  The average length of time to enter a bear market is 8 months, but this time it just took one.

We did see a sizable bounce back in the final week of March, but it remains to be seen if this is the beginning of a recovery or not. The disruption in supply chains will have an unknown but certain impact on business operations. Market moves of +5% and -5% have been prevalent, and we’re seeing record levels of volatility that we haven’t experienced before. This may continue in the near term.

Most stocks took it on the chin in Q1, with energy/oil companies faring the worst due to a decline in oil prices. The travel industry, including cruise lines, airlines, and hotels, also fared poorly.  Stocks in technology (people working more from home), staples (think toilet paper and disinfectants), and biotech (searching for COVID cure) survived the best of the lot.

Thankfully most of us have an allocation to the “bond” asset category for diversification purposes. Bonds, along with gold, were a couple of the saving graces in Q1. In stock market pullbacks, we’d expect to see them hold ground…and we did.

But just like that, the Coronavirus has dominated our lives. It’s affected our daily living, it’s all that is being discussed on TV, and unfortunately, it’s resulted in many illnesses and deaths across the globe. In a sense, the financial suffering pales in comparison to the health impacts that the virus is causing hundreds of thousands of people.

We expected to see political drama in this election year, but that’s taken a step aside as we observe the Coronavirus and its impact on the economy. Up through February, the US was holding strong on several fronts. But shutdowns from the virus have lead to business closing doors (some temporary, some permanently), and massive numbers of people now unemployed. We’ve seen unprecedented government support to help get us through this unprecedented period, and it’s ongoing.

As I type these words, the bulk of the country is on lockdown (official or unofficial). Being hunkered down I cannot help think of how our discretionary spending, like most other peoples, has grinded to a halt. In some ways, we are back to basics – living on shelter, food, water…and well, maybe some technology. Our materialistic culture has been officially exposed for what it is – largely excessive and unnecessary. I wonder if re-thinking how we live our lives will be changed forever?

Rather than being paralyzed from the negative news, I encourage people to look at the positive…that this storm will pass. We will get through this together. It’s pretty refreshing to visualize how nice it will be to get back to “normal” again. We may have a new appreciation for the little things that we were taking for granted daily.

I implore you to look for opportunities as well, not just regarding investment strategies but as it pertains to spending. What better time to identify areas to cut costs, and eliminate the things you can truly live a great life without? If your cash flow is still intact, how about re-allocating some of these temporary savings towards averaging more into the market? Have you looked into refinancing, or negotiating outstanding debts that you may have?

Undoubtedly, we are able to spend more time with family, both in-person and virtually. So there is a silver lining that comes of this, right?!

One thing I know we’ll continue to see: the commentators with the loudest doomsday narratives will still dominate in the media. The news tends to highlight the worst-case scenarios. Failing investors will make irrational decisions based on the news. Successful investors will continue to make decisions based on the tried-and-true principles that are aligned with a long-term plan. Despite the impulse to do something, the best strategy is often to just sit tight.

When businesses re-open and people go back to work, we hope to see a solid recovery. Things may remain unpredictable in the short term, but we certainly look forward to getting back to “normal”.

For now, we don’t know where the market will be heading. If anyone claims they know, take that with a grain of salt (because they don’t)! I remain committed to my personal financial plan and appreciate all of my clients who are doing the same. We’ve got to realize that people are resilient, and in turn, businesses and our economy will be resilient. The long-term outlook for us, and our economy, are bright. I appreciate those showing faith in our future, and not getting knocked off-course with storm clouds overhead.

This quarter we’re recently witnessed most of the impatient money leaving the market. Data in the coming months will be “ugly”, no doubt, but patience has historically rewarded investors over time. I will leave you with a quote from one of the best investors of all-time, Warren Buffet:

“The stock market is a device for transferring money from the impatient to the patient.”

Stay patient my friends.

Brandon

Disclaimer: This information contains forward-looking statements about various economic trends and strategies. You are cautioned that such forward-looking statements are subject to significant business, economic and competitive uncertainties and actual results could be materially different. There are no guarantees associated with any forecast and the opinions stated here are subject to change at any time and are the opinion of the advisor. Data comes from the following sources: Census Bureau, Bureau of Labor Statistics, Bureau of Economic Analysis, the Federal Reserve Board, and Dow Jones. Data is taken from sources generally believed to be reliable, but no guarantee is given to its accuracy.