“March comes in like a lion and goes out like a lamb” is an old proverb about the weather. We know that these old sayings don’t hold any credence, but we sure hope that the financial storms of early march subside soon.
Communications are coming fast and furious, and we are all receiving scary sounding official emails all over the place. We know the speed of the disruption to social and economic life has been staggering. This is leaving everybody a little punch drunk from all of the head shots that seem to be coming our way. “This too shall pass” seems all to pithy on the front end of this crisis, but there is truth to it. We all know it will pass, but nobody knows the speed at which it will pass. The isolation is effecting us all in ways we could never imagine. Humans are built to be social creatures and this is difficult on everybody.
We have been continually taking advantage of the bear market bounces and selling equities into strength on those days. We trimmed our equity on Tuesday and Friday when markets were bouncing. We are in our fully defensive posture. Liquidity has been difficult to find on many days and volatility has been at extremes only seen when Lehman Brothers collapsed. When volatility is this high it is not a sign of a healthy market.
The chart above shows the epic nature of this Black Swan event. There is of course no other market event like this one. The most similar event was 1987. That was not an economic shock but a purely financial shock. While valuations coming into this event were slightly frothy, they were nowhere near 2000 levels. Our financial system heading into this was on a firm foundation. The sharpness of the drawdown is what contributes to the stomach churning.
Though it seems funny our investment committee meetings have been focused on reminding everybody of our market re-entry process. That does not mean that we are jumping back into the market right now, but when you have taken defensive positions (selling) you always need to make sure that you have the plan in place for the other side of the trade (buying). That is the most important thing that everybody forgets in a panic situation like this. If you sell you must have a process for buying back in. If you buy you must have a process for selling.
At times like this it is good to think of what we can do proactively. Here are some of the things that we at Executive Wealth Management are doing to try to help our friends, neighbors, and countrymen.
We are practicing social distancing.
- Take local restrictions seriously.
- Small local businesses will be drastically effected by this economic shock.
- The restaurant industry and the millions employed there will be suffering more than most.
- In our office we are committed to purchasing lunch from local establishments for the staff that is working onsite.
- We are buying gift cards to things we will want to do when this is all over to cover part of that future expense.
- This will give those businesses some cash to help them through a difficult time.
- They will need financial help to assist those affected by this economic shock.
We are always here for you. If you have any questions please do not hesitate to call us.