Nothing has happened during my life to compare with what we are going through now. In my life we eliminated polio from the United States and most of the world. We beat back measles and other horrible diseases.
Several new horrible diseases and viruses have come along—HIV and Ebola come to mind. MERS and SARS are terrible killers, but they aren’t very contagious. Neither is Ebola.
But now we have a killer virus that spreads aggressively. Now we have mass hysteria.
I’ve known about mass hysteria, but it’s always been something I’ve read about. Now we’re living through it, and it’s not fun.
Let’s get right to the point. Humanity has been attacked for millennia by viruses. I have no doubt that the result of this one will be the same as all previous epidemics and pandemics. We will survive. We will find a way to manage this. I don’t expect COVID-19 to go away, but I do expect us to find effective treatments and vaccines, and I expect humans to develop some immunity to it.
For now, the biggest health risk seems to be ignorance. Because some people believe this is all just so much hype, they won’t take precautions against getting it, and—more important to you and me—many won’t take precautions against spreading it.
Further, the lack of testing kits is a major problem because there may be many thousands of people who have this disease and don’t know it.
But what does this mean to investors?
A whole lot of the economy is being shut down. The NBA suspending its season may not cause a recession. The NBA, NHL, MLB, and PGA all suspending their seasons may not cause a recession. But then add in all the conferences, business travel, tours, and more that are being canceled. Across the country hotels, restaurants, bars, and the entire sports and entertainment industry are being hammered.
Just like I have no doubt we will manage this disease, I also have no doubt we are dropping into recession fast. How long it lasts will depend on how long it takes for us to learn how to manage this disease. I don’t think it will be weeks. I think it will be months, and maybe even years.
But right now we have mass hysteria, and I do not expect that to last nearly as long. Humans are incredibly adaptable. We will learn to live with this emergency, and that includes markets. Markets are rapidly repricing themselves to account for a recession. I expect this repricing to go too far. There is no magic price that everyone knows markets have to get to. The panic will run its course, if it hasn’t already by the time you read this. The market will calm down. And before you think the disease emergency is over, the market will probably start to stage a comeback in anticipation of that.
Recessions were not canceled just because it was 11 years since the last one ended. Bear markets did not become extinct. So if you are a long-term investor, you have to look at this as both a time to remain calm and a time to look for opportunities.
Both of those things are far easier to say than do. We are all emotional creatures. Keeping your head in a crisis is not easy, but it is important.
I am reminded of extreme weather. In a blizzard, you don’t make changes. You hunker down and wait for it to pass. And if you need to go somewhere, you probably don’t wait for the last snowflake to fall before you get outside, clear the driveway, and get going again.
The current time is a lot like that—a storm that will pass. It’s probably better to hunker down rather than risk getting blown around in a blind snowstorm.
Be safe. Wash your hands a lot, more than you think you need to. We’ll get through this.
Hal Masover is a Chartered Retirement Planning Counselor and a registered representative. His firm, Investment Insights, Inc is at 508 N 2nd Street, Suite 203, Fairfield, IA 52556. Securities offered through, Cambridge Investment Research, Inc, a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Investment Insights, Inc & Cambridge are not affiliated. Comments and questions can be sent to hal.masover@emailsri.com. These are the opinions of Hal Masover and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. Investing involves risk. Depending on the types of investments, there may be varying degrees of risk. Investors should be prepared to bear loss, including total loss of principal. Past performance is no guarantee of future results. Indices mentioned are unmanaged and cannot be invested in directly.