We would like to tell you the answer.  When will this be over, and what is the market going to do next?  But you know no one knows.  This is a new challenge, and we have to face it and recognize what we are dealing with here.

We have faced major health care challenges before, including SARS, MERS, Ebola and AIDS.  We did not know how those would play out at the time.  And we don’t know now.

But we do know several things:

  • We know we have a plan to contain this virus, and we have seen this plan work well in places like South Korea. If we can execute on this plan, we can come out of this crisis in good shape.
  • We know a lot of progress has been made to provide testing for millions of people. That is essential.
  • We know a lot of leads for both treatment and vaccines are being developed in record time. We have to wait to see if these are successful and how quickly we can implement them.
  • We know that the Federal and State governments are 100% committed to addressing this issue. For example, the Bay Area has locked down at this point.  Unprecedented steps here, but steps taken in places like South Korea where they have worked.
  • We know this is a medical crisis and a serious challenge to the economy, but it is not a financial crisis like 2008. Banks are well capitalized and financial markets are functioning, despite the incredible volatility.  There are some issues with liquidity in credit markets; we are watching that carefully.
  • We know the media is in full panic mode and the equity markets have fallen very sharply.
  • We also know that in past crises markets have fallen a long way and then often bounced back sharply and unexpectedly. In hindsight, the worst moments were the best opportunities.
  • We also know that value stocks have underperformed even during this downturn, as energy and financials in particular have been hard hit. Growth/value valuation spreads have reached historic levels, going back to the year 2000.

Stay home and stay safe and try not to let this get you down.  We know we will come through this–there are lots of reasons for hope, but no certainty yet.

What is almost certain (we never know 100%) is that a lot of fearful people will bail out of equities at the bottom.  We have seen that a million times.  Don’t let that be you.

Best,

Roger Hewins

Team Hewins, LLC (“Team Hewins”) is an SEC-registered investment adviser; however, such registration does not imply a certain level of skill or training, and no inference to the contrary should be made. We provide this information with the understanding that we are not engaged in rendering legal, accounting, or tax services. We recommend that all investors seek out the services of competent professionals in any of the aforementioned areas.

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