Perspective in the Panic

Back in 1987, right after the markets had experienced the famous “Black Monday” decline which took the Dow Jones Industrial Average down by 22.6%, the weekly Barron’s financial publication featured, on its cover, a suitcase with the frightened eyes of a Wall Street broker peeking out of its dark recesses, and an arm reaching out to wave a white flag.

After the worst market week since the 2008 financial crisis, and one of the worst months since the 1930s, that image represents how a lot of professional brokers and traders are feeling right now. The market finished out a remarkably bad week of negative returns, including consecutive days of 1,000 point drops in the Dow and a February 1-month drop of 7.5% in the S&P 500 index.

But we hope that is not how you’re feeling at the moment.  Financial planners and advisors are paid to take on the worst fears of their clients, and it IS a burden when unanticipated black swan events rattle the traders who bid stock prices up or down.

If you’re open to hearing the good news, then consider that the actual value of the companies that make up the major indices are almost certainly not 10% less valuable today, as businesses, than they were last Monday.  The market drop is a panic attack, pure and simple, and real valuations should eventually reassert themselves.  The bad news is that neither we nor anyone else has any idea how long the panic attack is going to last, or exactly what those real values are, and we don’t yet know whether the triggering event—the Coronavirus, more precisely COVID-19—will spread into a pandemic, and if it does, how much damage it will do to the world economy.

Remember, to date fewer than 100 people have been diagnosed with the virus in the United States.  Doesn’t it seem a bit early for a panic attack?

Even though a lot of attention has been given to the virus’s impact on the markets, the more important issue is the health of you and your family.  You—like us—should be closely monitoring the spread of the disease.  You should know that simple surgical masks will not prevent wearers from the virus.  Medical experts say that we should be conscientious about washing our hands and using hand sanitizer and cleansing wipes.

There doesn’t appear to be a working coronavirus test at the moment, so watch for the symptoms: fever, cough, runny nose, shortness of breath.  There is no cure, but experts recommend resting and avoiding overexertion, drinking plenty of water, using a clean humidifier or cool mist vaporizer, and taking aspirin, ibuprofen or naproxen for pain and fever.  In 98% of the cases, the disease is not fatal, but it does seem to be more dangerous for older people.

Our wish is that you and your family will stay well, and that the virus will not become the pandemic that many (including market traders) are fearing.  And please understand that we (and everyone else) don’t know what the market will do on Monday or next week.  The panic might continue, or we might experience a quick recovery.  Keep in mind nobody can predict short term market movements.  However, over the long term, prudent investors have been rewarded for the risk they take in the markets and have recovered from technical corrections and bear markets.