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As we enter the next phase of the coronavirus event, we are in uncharted territory. We are not out of the woods yet, and we may make mistakes and suffer setbacks, but we know more now than we did a month ago.
The good news is that we appear to have “flattened the curve” and avoided overwhelming our healthcare system, although New York City has certainly struggled with this. The large numbers of hospital admissions and deaths predicted by some of the models have not happened so far, and hospital ships and field hospital units set up by the Army Corps of Engineers sit empty, thank God.
We are not medical authorities. We are financial planners observing this pandemic shutting down the world’s economy and impacting financial markets everywhere. We are working from home and closely monitoring every new development, knowing how little we know about what is coming.
So, what is driving the recovery in financial markets?
Have we ever seen a better example of how unpredictable markets can be? As we struggle to assess the financial devastation wrought by this accursed affliction, as we think of the local businesses we know, not to mention airlines and the energy industry, and wonder if they can come back from this, we watch financial markets recovering pretty rapidly. One more time, we have experienced a sharp and unexpected recovery. No sooner had we undergone the fastest bear market ever (16 days) than we moved into another bull market, 12 trading days after the market bottom on March 23. April experienced the best week in almost 50 years and was the best month since 1987.
Not that this story is over. Since we quoted Churchill’s famous “the end of the beginning” line in a recent communication, that line seems to be everywhere in the media, for good reason. We probably have a ways to go yet, and have to be prepared for surprising setbacks and problems.
This comparison to the 2008 crisis from a Wall Street Journal article is interesting:
Are we out of the woods, following in the footsteps of the bull market that started on March 9, 2009? Or will we see something more like the 2008-2009 dead-cat bounce, where another down-leg followed the initial advance?[1]
As long-term investors we know that we don’t know. Surprises are the rule, not the exception, and we gave up on guessing a long time ago.
Have you been creative and productive with your time on lockdown?
Consider the case of Sir Isaac Newton.[2] In 1665 he graduated from Trinity College in London, and then sheltered in place on his family farm up north as the Great Plague of London killed 15-20% of the city’s population.[3]
In this quiet retreat he didn’t get to watch daily press conferences and track deaths by district as pundits shouted their opinions from the rooftops. So, in the solitude, he created the “annus mirabiliis” – the “year of wonders.” Among his minor achievements he basically invented calculus, discovered that white light is comprised of all colors of the spectrum, and, wait for it… came up with the law of universal gravitation.
Me, I am still trying to play guitar and speak Spanish, with very limited success. I hope you are doing better and keeping your spirits up! Don’t let your hopes rise and fall with the events of each day; let’s hang tough and get ready to recover.
Best,
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.
[1] Mackintosh, James. “Stock Market Surge Isn’t as Crazy as It Seems.” The Wall Street Journal, Dow Jones & Company, 30 Apr. 2020, www.wsj.com/articles/stock-market-surge-isnt-as-crazy-as-it-seems-11588249144?tesla=y&mod=article_inline.
[2] Ott, Tim. “Isaac Newton Changed the World While in Quarantine From the Plague.” Biography.com, A&E Networks Television, 25 Mar. 2020, www.biography.com/news/isaac-newton-quarantine-plague-discoveries.
[3] Little, Becky. “When London Faced a Pandemic-And a Devastating Fire.” History.com, A&E Television Networks, 25 Mar. 2020, www.history.com/news/plague-pandemic-great-fire.