March 16 2020 Market Update

Touching Base: Markets and Covid-19

Markets opened sharply down this morning, triggering a trading halt.^[2] Market participants rushed to sell assets as the potential economic ramifications of measures intended to slow the COVID-19 pandemic began to take shape.

The selloff occurred despite the Federal Reserve’s decision to step in with an emergency rate cut and new bond buying program over the weekend, which brought the US target interest rate to nearly zero.^[3]

This might feel like nothing but turbulence and chaos right now. That makes it all the more important to remember the following:

Take a step back from the panic

In grocery stores and in markets, we are seeing a lot of behavior driven purely by fear.

In our view, the panic selling this morning – which followed a near-euphoric upswing late Friday^[4] – is not based on a high degree of in-depth analysis by market participants. It is driven by emotion.

The COVID-19 situation is difficult to analyze. It’s clear there will be economic ramifications – by some estimates, most global airlines will be bankrupt by May without some support,^[5] and business and school closures will likely take a toll on economic activity. But how much and for how long are still unknowns.

The bottom line: right now, as a general rule, we do not think it’s a good idea to try and sell financial assets.

We don’t see these price swings as reflective of underlying value, and prices could move drastically from one day to the next, making it much easier to make a mistake.

Remember your investment policy

When equity markets swing upwards, we tend to get questions about why we haven’t exposed client portfolios to more equity. This is the reason why.

By building a portfolio that is diversified across asset classes in a way that aligns with your personal needs, we can help cushion the blow from situations like this one.

If you have any questions at all about cash flow, your savings, or your investment policy, please reach out to us.

We are moving our meetings to a virtual platform, and you’ll receive instructions from us about how to access these.

Keep in mind that the economy is still moving

The food supply chain is firmly in place. We have gas to put in our tanks. We’ll be spending a lot more time at home in the coming weeks, but our economy is still functioning.

Yes, estimates indicate that there will be short-term fallout from COVID-19. It could be significant.

But we do not believe this is permanent: our economy was robust coming into this situation, and if past crises are any indication, we have not lost our ability to bounce back.

We are here

In times of panic, maintaining calm is extremely difficult, but it is also crucial. We are here to talk about your concerns and to help you through it.

You can always reach us via our main line at (323) 866-0833 or via email.

If you’d like to schedule a meeting or talk face-to-face, we have conferencing software available so that you can see your advisor via phone, tablet, or computer.

We are here to support you and help you navigate this situation, and we’re working around the clock to do so. Thank you so much for your support and trust in our firm.

JSF Financial