COVID-19 & My (Investor) Perspective March 16th, 2020 2:20 PM PST
Anthony Danaher
Doing whatever I can to help others achieve long-term financial goals as President of Guild Investment Management and as Principal, Wealth Advisor at Farther
While the bulk of this contains some thoughts on the markets and business, I recognize that these are by far not the most important issues right now. The health of each and every one of you and those you love is much more important. I would also like to add that I feel deeply for healthcare workers who are and/or will be on the front lines of this battle. They usually go underappreciated and for what they will be facing are probably way underpaid.
While the panic in the markets (both stock and grocery) may not seem rational…the fear that drives it has become real. I believe there are some things we need to see to dial down that fear.
From an investor’s perspective, I liked seeing the Federal Reserve’s moves and their commitment to outright asset buying. We knew it is an eventuality, so glad they unveiled it. We know more is coming as well. The amount of fiscal stimulus and monetary debasement that is coming is going to be huge. That being said, cheap or free money will not stop the global medical emergency we are facing. At least as far as markets are concerned, there is an opportunity that the Fed announcement this week is something that could help start a recovery process. If nothing else, the Fed’s involvement may allow for better-functioning markets than we had these past few weeks. I am certain that (as has happened with every bear market in the past) the market ends up going to new highs over time, especially with all this stimulus that is being put into the system. But it is not clear when it will begin. Headlines will drive behavior. The virus headlines will trump the stimulus headlines as it pertains to the public fear gauges. One thing we know from history is that the nature of markets is that they will bottom before the fear peaks.
The key may be the non-market related signals. What I would like to see is any deceleration in the number of COVID 19 cases in Europe and the US (likely not until April), absent that deceleration…the public wants some more reliable data about a mortality rate coming from sources that people trust. Is it really sub 1% mortality or not? As data comes in, does it suggest that Korea’s experience is the exception? Or does it suggest that what Italy is going through is the exception? Hopefully, it’s the latter. Italy’s numbers are being extrapolated to larger developed countries and that is a lot of what is causing panicky headlines…and behaviors.
I would also like to see fewer pictures on the internet of overwhelmed Italian hospitals and empty grocery store shelves.
Back to an investment perspective, and remembering that fortune favors the bold, I want to build a long-term buy list. We do want to be ready to buy good companies that we maybe have missed in the past, and that we never thought would get this cheap. We believe a time will come to make money on this, but the near term is unclear, and it is hard to suggest how many days, weeks, or months it will be before the next bull move gets underway. In the meantime, we watch and take some precautions. I do believe it is too late to panic out of good companies.
Recognizing that the information flying around is scary, confusing, and contradictory, I do understand the varying behaviors we have seen. Each of us is in a different situation, and each of us will respond differently to the information we are all consuming. Be safe, be smart, and be patient with each other.