Suffice it to say, 2020 has started off with plenty of challenges and we continue to have challenges.
If I were to have told you back in February that you’d be wearing a face mask every time that you went to the grocery store, you would have thought I was losing it. If I were to have told you that unemployment would spike to 40MM people, you would probably ask me what I was drinking. If I would have told you airplane flights would fall by 90% from the same time last year, I don’t know what you would think; but you would think something.
The word that has been bantered around most this year is “unprecedented.” I know I’ve used it many times. But are things really unprecedented? I know locking down small businesses to ward off the spread of a virus is something no one recalls happening before. But if you change the dates, the events, the people, and the places, a lot of the stuff we are seeing now has happened before. Stock market crashes, recessions, sicknesses, questions of what to do, where to invest your money, how bad are things going to get? These are magazine covers from the 70s and 80s!
The old Mark Twain adage that history doesn’t repeat itself but it rhymes is appropriate for today.
Now, one of the business questions we have been asked is this: despite Covid-19, despite social unrest, despite political divisiveness, why is the stock market going up after crashing in March of this year? Well, one explanation is that the crash took into account a pretty bad case scenario that we were going into a recession and maybe even a depression and thus sold off 35% quickly in a matter of weeks.
The Fed and the Treasury then stepped in with stimulus payments and they flooded the markets with money to settle things down. The rebound in the stock market is telling you that the market thinks a depression is off the table and that the reopening of the economy is going to be successful. Further, it figures if there is another resurgence of the virus, there will not be another lockdown.
Ok, so how are things going to play out going forward? Nostradamus himself couldn’t answer that question so I’m not going to pretend to tell you that I know; but I know a few things. We’ve been managing money and working with our clients finances for a long time and I do know that our clients tend to prefer a good nights sleep over worrying about the roller coaster ride in the stock market. I do know that bear markets follow bull markets and vice versa and when people start fearing that they are missing out, it’s generally not the best time to chase returns. And I know that the sun will come up tomorrow and the future is just as uncertain as it always has been. But we will adjust to the uncertain future because we have to and I’m confident of that.
You know, when I was coaching and teaching kids about baseball and basketball, I would try to teach the kids other things other than sports: how to give a good handshake, which one day might be important again. I taught them that as they grew older, they would realize that they learn more from failure than from success. I would also tell them that it doesn’t matter how you start, it only matters how you finish.
As I said, the year has started off pretty bad, so let’s knock on wood that 2020 will take that finishing strong lesson to heart. Time will tell.