Financially Speaking: Observations that helped navigate portfolios throughout this pandemic – Troy Record

We like to think that we have had some profound, timeless thoughts that have helped the readers as well as our clients survive the volatility that has accompanied the COVID-19 pandemic.

We will let you be the judge of that as what follows are some that we have added to our journal over the past couple of months along with quotes from others that we believe are quite perceptive. However, we would first like to start with the following statistics regarding the U.S. stock market as represented by the S&P 500.

Since 1928 the rolling ten-year return of the S&P 500 has been higher approximately 95% of the time and lower just 5%. The more an investor meaningfully alters their asset allocation model in response to market downturns, the percent chances of positive returns over the aforementioned ten year period decreases.

Since 1950 the S&P 500 declines an average of 5% about three times per year; 10% or more approximately once per year; 15% or more about once every four years and 20% or more about once every six years. It is not a question of if another bear market will occur it is question of when.

Every market bear or bull has a catalyst. Quite often those catalysts are unprecedented which is why investors fall into the trap of thinking that it is different this time and that the financial markets will not recover. To date, that stance has always been incorrect. Today, what does your investment strategy say about what you believe?

A skilled T. Rowe Price portfolio manager once wondered aloud, How do you deal with the stress of markets? If you seek comfort, you are in trouble. You have to learn to be comfortable being uncomfortable. (David Eiswert, Portfolio Manager, T. Rowe Price Global Stock Fund)

We have complete confidence that the U.S. Financial Markets have been the most direct route for most investors to obtain financial independence and have no reason to believe that this time is any different.

Historically, the rallies such as the one we are experiencing off the March 23rd lows fade which result in an ultimate retest of those lows. Although likely, this time may be different as the catalyst behind the bear market was different. It was not looming economic weakness brought about by a foreseeable economic event but rather by an abrupt shock to the economy. Investors have to plan for either outcome a retest of the lows or a market that approaches new highs.

It was the rapidity of the decline in the stock market as well as the depth that was most unnerving to investors and what resulted in a pervasive sense of doom.

Eventually there will be a new normal. Over the short- to intermediate-term investors should prepare to look for opportunities in a world where there is less brick and mortar retail and more online; less recreational and business travel (although business will most likely rebound to a certain extent first); less but more costly air travel; more videoconferencing; less need for office space as more people work remotely; when they resume fewer attendees at sporting events, concerts and other public events and more online gaming. Spacing, Spacing, Spacing.

Those that panicked may very well have fatally compromised their long-term financial well-being.

If you have some of your own, please feel free to email us at investment@faganassociates.com Enjoy your weekend. Stay safe. Be well.

Please note that all data is for general information purposes only and not meant as specific recommendations. The opinions of the authors are not a recommendation to buy or sell the stock, bond market or any security contained therein. Securities contain risks and fluctuations in principal will occur. Please research any investment thoroughly prior to committing money or consult with your financial advisor. Please note that Fagan Associates, Inc. or related persons buy or sell for itself securities that it also recommends to clients. Consult with your financial advisor prior to making any changes to your portfolio. To contact Fagan Associates, Please call (518) 279-1044.

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Financially Speaking: Observations that helped navigate portfolios throughout this pandemic - Troy Record