March 2020
Keep Calm and Carry On.
There is no record of the British civil servant who originally designed the “Keep Calm and Carry On” posters in 1939, but it is the quintessential embodiment of courage and grace under pressure. As such, it makes the perfect reminder for investors in the midst of a stock-market correction.
It’s easy to be influenced by the media hype when stocks make a big move, either up or down. So we offer a few thoughts on recent events:
We saw this coming, as did most investors. In fact, we’ve been saying for three years now that stock valuations are too high overall. We were beginning to sound like Chicken Little, perhaps. But it’s not a surprise.
In the grand scheme of things, this isn’t a big move. Markets are down by about 8-10% form their recent all-time highs. It’s just the magnitude of the daily moves that is historically large. The stock market is now approximately at the level it was four months ago.
Coronavirus will have a real impact on the global economy. It has – and will – impact the profits that companies make. Stocks should be priced rationally, and prices should account for lost revenue.
Things may get worse. However, the impact of the virus is not likely to be catastrophic. Consumers will cancel vacations and curtail spending temporarily, but they will get back on their cruise ships in due course.
There will be more corrections and recessions, along with bull markets. All the world’s brilliant economists have not yet figured out a cure for the business cycle.
We are long-term investors, but many speculators only care about short-term profits. They will continue to buy and sell at the first hint of bad (or good) news. We will keep calm and carry on.
On a separate note, don’t forget the 2019 Roth IRA contribution deadline is April 15 (tax day). We will be contacting you if you are eligible, but you can also remind your children or grandchildren, as Roths are terrific savings vehicles.
