Coronavirus Update
We are writing to you today to continue providing you with timely information and to hopefully provide comfort with regards to your investments.
After hitting bottom on March 9, 2009 in the depth of the financial crisis, the bellwether S&P 500 turned around and launched into one of the greatest bull-runs in history, posting a 330% gain to March 11th, 2020. **S&P500 – United States
It wasn’t straight up, and along the way there were several nerve-fraying corrections with the market falling by more than 10% each time.
The bull market ended on March 11th, 2020, when the TSX, Dow Jones Industrial Average and the S&P500 along with most all European exchanges officially declined by more than 20%. Now we find ourselves in market conditions similar to 2008. Much like then, people are nervous, afraid and unsure of their future.
I looked up the word ‘panic’ on Google and found the following.
“Panic is a sudden sensation of fear, which is so strong as to dominate or prevent reason and logical thinking, replacing it with overwhelming feelings of anxiety and frantic agitation consistent with an animalistic fight-or-flight reaction.”
It seems that this is what we are dealing with today. Fear of a virus that has taken over the entire world holding us hostage from our normal lives. Fear of what the future will bring, panic from what our investments look like and how long it will take them to recover.
It is times like this that remind us that we cannot predict the future, and we cannot predict what will happen next. What will happen to the markets once coronavirus gets under control? How much will markets increase once the panic subsides? The past few days we have heard from many of you wondering what to do. The questions are all very similar, looking toward the future and trying to determine what will happen next. As much as we would like to, we cannot answer these questions, we haven’t any idea what the future holds and what this coronavirus will do or how long it will take to recover.
We believe in the following principles that have served us well as Professional Advisors and as long-term investors for many years.
1) It is imperative to have a plan or a sound intellectual framework that includes a risk assessment. Why are you investing? What risk can you assume? How long are you investing for? Is there a time when you will need access to your money?
2) It is imperative to have discipline and to be consistent when evaluating different investment opportunities.
3) It is imperative to have control of emotions, especially during times like this.
We wish that we could tell you when things will start getting better and when markets will go back up. We can’t and we won’t even try to guess.
What we can say is the following.
· History has shown that every bad market period is followed by a good period that generally lasts for years.
· Your investments are tailored to your own specific needs. Risk tolerance, time horizon, liquidity needs.
· Panic is not a sound investment plan, and we will never make emotional decisions. You shouldn’t either.
· We are in regular communication with Portfolio Managers from around the world continuously assessing current circumstances.
· We are here, and available at any time for your inquiries by telephone or in person.
· We lived through the financial crisis in 2008 and successfully guided our clients through one of the darkest periods in history. This is no different and we will successfully guide you through this period as well.
· By not panicking in 2008, investments generally returned to pre-2008 values within about 18 months.
· Once this downturn period ends (given the extent of the current decline, it could be soon) it is likely to turn into one of the greatest buying opportunities in a generation. Remember that this is not a financial crisis such as a depression, this is a health issue that can be resolved reasonably quickly with a medical response such as medication or a vaccine.
· Interest rates are close to zero, unemployment in Canada and the United States is the best it has been in 60 years. The economy was doing reasonably well heading into this virus.
· Infections in China and South Korea seem to have peaked and are now turning down. Will the same thing happen in North America soon?
We are asking for your continued support, your discipline and control of emotion until we get through this coronavirus inspired downturn. We will do our very best to keep you informed and to continue to manage your funds as best we can throughout this period. Times like these remind us why professional oversight is so important. We can and will help you make the right decisions for you and your family.
Yours truly,
Jamie C. Hodgins, CIM FMA FCSI
Senior Financial Advisor