Submitted by Southwest Investment Advisors on March 26, 2020
The world continues its battle to contain the COVID-19 pandemic, which now has likely impacted, either directly or indirectly, nearly every person on Earth. This is far more than just a health crisis—this is a human crisis. Its fearful wake will only be bested by the bravery, perseverance, and hope of a determined world. It is more than just a dangerous illness, it is a test of our resolve.
Resolve requires more than just the courage to stare down the unknown—it is the commitment to overcome it. It all starts with the heroism of the first responders saving lives and scientists working tirelessly to find a cure. It shines on the truck drivers and market workers restocking empty store shelves. And resolve includes the sacrifices of small businesses and working Americans that are delaying the pursuit of economic growth for the temporary social-distancing practices that are helping to contain this pandemic. This unified resolve will be the ultimate cure for COVID-19, but its side effects are proving to be costly: slower economic growth over the short-term, a rise in unemployed Americans, and the resulting volatility we continue to see in the markets.
Nobody knows when and where this will end. But we have confidence the recovery—for our nation, our economy, and the markets—is around the corner. We also know that the S&P 500 Index is 34% below its all-time high (as of the close March 23, 2020) from just over a month ago and is essentially pricing in the full extent of a recession (historical average is -37% in a recession). Though sell-offs are never encouraging, a bright spot is that this one resembles the severity of the market reactions during past severe pandemics. During the unusually deadly influenza outbreak of 1918, stocks dropped 33% before recovering; about 50 years later in 1969, a dangerous flu pandemic drove markets down 36%. Today, ironically another 50 years or so later, markets have declined a similar amount, which brings to mind the famous Mark Twain quote, “History doesn’t repeat itself, but it often rhymes.”
There are more negative storylines yet to be told in this pandemic as new cases continue to grow in the United States, concern remains elevated, and market volatility reigns. Every day, we are inundated with more and more cancellations—everything from shuttered workplaces to closed schools, cancelled graduations, and restricted public gatherings. But, optimism for the near-term future has not been cancelled. Neither has hope. And, neither has the long-term prosperity of America, our economy, and the prospects for long-term investors to possibly participate in an eventual market recovery. Our future is not cancelled—it has been ignited with our resolve.
Please stay healthy and contact me if you have any questions or concerns.
Reminder: our scheduled Client Appreciation Event on April 5th for UofA Baseball vs Stanford has been cancelled by the UofA. Things keep evolving, and so must we all.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.