An Update from Jeff Dobyns About COVID-19 and Market Volatility

In the midst of the current public health crisis due to coronavirus or COVID-19, this quick note is to encourage you to hang in there and stay strong. This is the type of volatility we have been expecting for some time now as we all knew that the market would have some short-term correction at some point.

March 9, 2020, was the eleventh anniversary of the crescendo of global panic that marked the bottom of the bear market of 2007-09.  It is ironic that the world has elected to celebrate this iconic anniversary with—you guessed it—another epic global panic attack.

After yesterday’s close (March 12, 2020) of 2480, the S&P 500 is down over 27% from its all-time high of 3,386 recorded on February 19. Declines of that magnitude are fairly common occurrences—indeed the average annual drawdown from a peak to a trough since 1980 is close to 14%.* But such a decline in barely a month is noteworthy, not for its depth but for its suddenness.

As we all know by now, the precipitants of this decline have been (a) the outbreak of a new strain of virus, the extent of which can’t be predicted, (b) the economic impact of that outbreak, which is equally unknown, and (c) most recently, the onset of a price war in oil. (That last one is surely a problem for everyone involved in the production of oil, but it’s a boon to those of us who consume it.)

The common thread here is unknowability: we simply don’t know where, when, or how these phenomena will play out. And in my experience, the thing in this world that markets hate and fear the most is uncertainty. We have no control over the uncertainty; we can control how we respond to it.  Or, ideally, how we don’t respond. Long-term, goal-focused investors like us focus on the big picture. If you have inquiries around the issue of putting cash to work, please give us a call.

On March 3, the billionaire investor Howard Marks wrote, “It would be a lot to accept that the US business world—and the cash flows it will produce in the future—are worth 13% less today than they were on February 19.”

And, the good news is that the Democrats, Republicans, and the White House appear to be working together to help provide relief for the coronavirus outbreak.

This video from our long-time friend Dave Ramsey (starts at about 40 seconds into the video) is a great reminder about the dangers of getting off of the roller coaster in the middle of the ride.  I think it is a great analogy—I do love riding roller coasters, but I am scared until it’s over…and then I join the kids for another ride. Please let me know if we can help you in any way!


Jeff Dobyns

President, Southwestern Investment Group | Financial Advisor, RJFS

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