Dear Clients and Friends,
The Dow fell 9.99% today, the worst one-day percentage decline since the 22.6% decline of Black Monday (October 19, 1987). In just 18 days of trading the Dow shed 8,197 points or almost 28%. The rapid plunge in equity prices and the absolute torrent of alarming news about the effort to slow the spread of the coronavirus has been shocking. I won’t add to the drumbeat of disturbing headlines about closures, bans, suspensions, and postponements.
Seeing the market in free-fall is distressing. Measuring up the losses, one can’t avoid feeling regret for not getting out before the decline. Seeing prices fall dramatically day after day makes us wonder if there is a bottom. Accepting that our lives are going to be disrupted dramatically in the weeks and months ahead is difficult. We’ve never been through something like this before, and we’re not wired to easily accept change of this magnitude.
We’ll get through this. It will be difficult and it will take time—months and maybe years. But we will get through it. And I think most people know this. Even as we shudder to hear that March Madness won’t happen, that schools are closing, that church services are canceled, we know that we will move past this. Even as we acknowledge that we ourselves or people we know may be tragically affected by this, we know that we will move past this.
Investors know this too. The market knows we’ll get through this. But right now, uncertainty is creating panicked selling. Investors desperately want certainty in valuing a security. What will this company earn this year, next year, and the next? That answer can’t be found right now. It is a certainty that economic output will decline in the months ahead, and corporate earnings will definitely take a hit. How large of a hit is unknown at this point. When the virus situation becomes clearer (and it will in time), investors will gain certainty about economic growth and earnings potential, and the market will stabilize. In our view, our lives will eventually return to normal (or perhaps a new kind of normal), the market will learn to live with this situation, the economy will begin to expand and earnings will grow. Again, this will take time.
Here are some reminders that help us during times of uncertainty and falling prices:
We hope these points are useful to you in the days ahead. It is unsettling to read today’s headlines, to endure this market volatility, and to see your portfolio lose value. As a client of Bragg, this has been your experience of the last few weeks. Please know that we take our responsibility to you seriously; we don’t like it when your account is down and we worry when we think you are worried. Please let us know if you would like to discuss your portfolio or your planning. We greatly appreciate your continued trust in Bragg.
Benton S. Bragg, CFA, CFP®
President, Bragg Financial Advisors
Here is a link to our earlier commentary about Covid-19 and here are links to resources we have found especially useful during this time: