Rattled By The Market Drop? You're Not Alone

Rattled By The Market Drop? You're Not Alone

March 25, 2020
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"Toilet paper stockpiled – Check. Watched how to wash my hands video – Check. No sports, no school, no hairdo-dye appointment."

You're not alone. An estimated 5% or more of the world’s population died from the influenza pandemic of 1918 - 19201. It started during the last year of World War I (WWI). Stay-away policies, quarantines, makeshift and military-constructed hospitals were a part of the regimen of solutions then too. WWI troops were like today’s travelers, bringing the virus to our densely populated cities and ports. 100 years ago they had the heroism of first responders. But, they did not have the benefit of test kits to quantify the pandemic or track it’s spread. Now, we also have the innovation of bioscience, a stronger core of health caregivers, and a well-funded federal government.

Hot Spots

The unified and massive response of governments around the globe is encouraging. In coordinated action with central banks all over the world, our Federal Reserve (Fed) has already cut rates and announced open-ended asset purchases in a historically aggressive attempt to mitigate disruptions in financial markets and re-establish free flow of credit to consumers, businesses, and state and local governments. Fed Chair Jerome Powell stated that the US central bank stands ready to do “whatever it takes”—echoing the same words that European Central Bank President Mario Draghi said in the aftermath of the Great Recession to keep the Eurozone from unraveling. And, Congress is conducting its last negotiations on what will nearly be a $2 trillion fiscal stimulus package to rescue struggling businesses and impacted Americans. These monetary and fiscal policy initiatives cannot fix the problem—only scientists, nurses, and doctors can do that—but they can help “fix” the recovery, by helping to make sure that as many businesses as possible are strong enough to re-start their growth engines to aid the economy as soon as this global pandemic wanes.

Nobody knows when and where this will end. But we have confidence the recovery—for our nation, our economy, and the markets—is around the corner. We also know that the S&P 500 Index is 34% below its all-time high (as of the close March 23, 2020) from just over a month ago and is essentially pricing in the full extent of a recession (historical average is -37% in a recession). Though sell-offs are never encouraging, a bright spot is that this one resembles the severity of the market reactions during past severe pandemics. During the unusually deadly influenza outbreak of 1918, stocks dropped 33% before recovering; about 50 years later in 1969, a dangerous flu pandemic drove markets down 36%. Today, ironically another 50 years or so later, markets have declined a similar amount, which brings to mind the famous Mark Twain quote.

"History doesn’t repeat itself, but it often rhymes.” -Mark Twain

There are more negative storylines yet to be told in this pandemic as new cases continue to grow in the United States, concern remains elevated, and market volatility reigns. Every day, we are inundated with more and more cancellations—everything from shuttered stores to cancelled graduations. But, optimism for the near-term future has not been cancelled. Neither has hope. And, neither has the long-term prosperity of America, our economy, and the prospects for long-term investors to possibly participate in an eventual market recovery. Our future is not cancelled—it has been ignited with our resolve. Most importantly, our patience is the virtue that best protects us as we move forward.

Part of why I’m here is to help you navigate through uncertain periods. While many of us are collectively pausing face-to-face contact, there are plenty of other ways of staying connected. I’d love to hear from you, so please feel free to reach out to me via email or phone anytime, for any reason.

Faithfully yours,
1. https://mashable.com/2014/10/08/influenza-epidemic-1918/
Ladies Image: c. 1918 Keystone/Getty Images
Makeshift Hospital Image: c. 1918 Edward A. "Doc" Rogers / Library of Congress via AP, Oakland Municipal Auditorium
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