One of the worst weeks that we have seen since October 1987. We are here, you are there, and we are all in this together, and yes, this has been painful to all (including us). Today, the market was down 16% from the high earlier in the month but, please remember, the market was down 19% near the end of 2018, the only difference is, that selloff took (3) months and this sell-off has taken place in (7) days.
We believe the “talking heads” on TV and the media have done an excellent job of scaring the “pants off” everyone (our opinion) and how it has affected the market is unprecedented. Based on the “rapid” selloff in the past few days the market could be suggesting the possibility of a systemic issue that goes far beyond the whole coronavirus concern. Meaning, if the entire virus issue does “actually” take hold (which at this time is not a certainty and we do not believe it will, based on current information) it could have enough economic impact to actually change the current valuation landscape for the market. If this does happen, the possibility of entering a “Bear Market” becomes a real possibility.
Should the market fall more than 20% and remain at or below that level for 2 quarters (many analysts believe this denotes a “Bear market”), we will alert you and reevaluate investment strategies going forward.
The market (stocks) was priced high because of projected earnings growth in the second half of this year. Now that growth has all come into question, as there is no “playbook” for this virus stuff.
This does not mean the market will not find new all-time highs again (even this year), but it does mean it could go dramatically lower prior to making new highs again. However, as we’ve said many times before, knee-jerk, fear-based investment decisions should be avoided, because there have always been very strong rallies following extreme, broad-based selloffs as we have had (and are experiencing). Some of these rallies have been immediate (such as the end of 2018 and after the huge sell-off back in 1987) and some have taken a few weeks/months to unfold which means investors need to “take a chill pill” prior to making any hasty decisions.
We will continue to keep you informed as this volatile situation unfolds in the days/weeks ahead and as always, invite you to contact us with any individual questions you may have.