The Worst Of Times Can Bring Out The Best Of Us

These are the worst of times, yet the worst of times can bring out the best of us. My team and I have been pouring over what’s happening in the markets, the new law, and talking with some of the best and brightest people in the country. This is where our size can be beneficial. It’s one thing to hear something on CNBC, quite another when I can ask “Okay, tell me what you really think, and what you are doing about it”. My goal is to keep a promise made to every client. A promise to provide “Wealth Management with Wisdom and Care”. This is just one of the ways we can do that. Thank you for reading these letters and emails, and for the feedback you’ve given to me and our team. Honestly, hearing from you is what gives us joy. Please let us know if you find this information helpful.

So, let’s get to it! Chances are you are hearing about the twin bazookas fired off by the Federal Reserve and The Federal Government. I am going to continue bringing this up because it is such a big deal; and assuming we get out of this, we will all look back and understand it was because of the response of our leaders. This is not a political statement, simply an observation. Now we will see how well they can execute. The Fed has it a little easier: They injected about 3 Trillion dollars into the markets, and Jerome Powell has basically said “We will do whatever it takes, whenever it is needed, for as long as it is needed. And he can! He also has the benefit of Ben Bernanke’s yet untested moves during the Financial Crisis, which probably saved the worldwide economy back then. Powell was able to take these initiatives right off the shelf, with little concern of unintended runaway inflation. In fact, I think he would welcome a little bit of inflation this year.

President Trump signed the CARES Act into law last week, injecting a much needed $2.2 Trillion dollars into the economy. If you are a client, please be on alert: You will be receiving a separate letter outlining ten proactive moves to consider right now. Frankly, only one of them has to do with your portfolio, and as I have mentioned in previous communications, we’ve already done two rounds on each client’s portfolio. The key here is to make sure your portfolio remains congruent with your personal situation, and the plan we’ve laid out for you – long before any of this happened. We stressed tested the plan, understood if and where a client may be vulnerable and are acting accordingly. We are also working on many of the remaining nine items, and I want to keep you in the loop. These are the times to keep a level head and think strategically, and I am excited about some of the opportunities the new law is presenting to most of our clients.

I make no prediction about the markets except to say I believe they will continue to be volatile until we get more data, and with it – more clarity. You can’t manage what you can’t measure, and the United States was behind other nations in terms of testing. The market has been in panic mode, plunging one day on a piece of news, then skyrocketing the next on something else. Fear cuts both ways – fear of loss and fear of missing out. Our kids call that FOMO, and while most people don’t associate that with the stock market, it is very real. Just look at any 1000 point UP day in the Dow- occurring several times in the last 3 weeks. We are now seeing the reverse of that. The last two days have been comforting – at least for now. These swings are not normal, and I understand how uncomfortable it can be. There will be a time when the fog clears, and we have a much clearer understanding of how many people are afflicted, and who is not. Eventually, they will get the all clear to return to work, and our lives will begin to return to normal. Or as normal as they are going to get.

Things are going to be different, but different isn’t bad, it’s just different! I am finding that out in my own small business, where I’ve had 25 employees all working from home. We are finding ways to keep communication flowing, and most of us are finding this time an opportunity to be even more effective. Phone calls are going to one person and being delegated to the appropriate team member. While that’s not very different, their ability to hyper focus on just one person without interruption is. That’s another thing that’s different- I have the time to send you letters outlining what we are learning and what we are thinking! Again, different isn’t bad, except that my letters might, from time to time, put you to sleep.

If you saw Neil Kashkari’s (Head of Federal Reserve in Minneapolis) interview on 60 Minutes, you learned that there is no end to their ability to shower our economy with cash. It has been a firehose aimed directly at the areas on fire. It has worked, and the building is still standing. Market failures have reversed themselves and the Fed has averted what happened in the financial crisis. It also has bullets left.

And what he said next, is what intrigued me the most. Kashkari also said that as they looked back to the financial crisis, they learned that our leaders in the Fed and Government made TWO big mistakes- they were too slow and too timid. First, they lowered rates, then they did QE1. Months later they did QE2 and even QE3. This time, Jerome Powell had the benefit of the financial crisis, and was able to take these programs (which had never been done and tested before the financial crisis) right off the shelf, and he was able to do it faster and with few misgivings. Research done by Mark Zandi and Alan Blinder found that the QE programs did not trigger inflation as was feared, and without them – even as delayed as they were – things would have been much worse.

A Central Bank’s (Federal Reserve in the US and ECB in Europe) role in any economy is to contain the damage. They cannot restart an economy. Going back to the financial crisis, on the fiscal side, the Treasury was slow and timid as well. It takes time to work through the system to get where it needs to go. First, they lowered taxes, then there was a temporary payroll tax cut. There was cash for clunkers and TARP and a bunch of other initiatives to stop the bleeding and restore faith in the financial system. I really appreciated his honesty. Kashkari said, “We were too targeted in an attempt to only help the deserving. In hindsight we should have erred by over-reacting to help everyone- deserving and not deserving. Err on being generous. If we had done that, the crisis would have been less severe”. Today, small businesses need an incentive to keep employees because it takes too long to get them back to work – it took 10 years for unemployment rate to get back below 5%.

In a separate interview, former Chief Economic Advisor Gary Cohn commented, “You cannot overreact to this situation. It is best to be decisive and move quickly. If we make a mistake, fine. The government and federal reserve cannot make a mistake of under spending. When we are dealing with imperfect information, accept that we may make imperfect decisions”. Don’t let perfect be the enemy of good.

There are no bad actors here like there was in 2008. No one caused this. We also must be careful; the false assumption of retrospect can creep in. When we heard about the Wuhan virus wreaking havoc in China, didn’t we know that the virus would eventually make its way across the ocean and have a similar impact in the US? Isn’t this mess we’re in obvious in retrospect?

The truth is we’ve experienced quite a few major flu epidemics which ultimately had very in little impact on our economy and our markets.

1. There was the first “Asian Flu” from 1957 – 1958 which caused roughly 2 million deaths worldwide and caused barely a ripple on the economy or the markets.
2. There was the “Hong-Kong Flu” in 1968 that stole the lives of one million people globally- and that also didn’t stop the economy in its tracks or trigger social distancing.
3. In 1997 we had the “Bird Flu” which caused a worldwide scare but once again the economy moved on without a ripple.
4. Then came SARs caused by a novel bug called a Coronavirus. In 2003 it roared out of Asia and spread to more than two dozen countries and again the social and economic impact was minimal.
5. In 2009, “Swine Flu” originating in Mexico combined with the “Eurasian Flu” in Europe killed more than 18,000 people around the world. It turns out that 2009 was a good year for the markets and the economy as it recovered from the great recession.

The point here is that there have been major flu outbreaks in the past which looked just as scary as a current Coronavirus and ultimately were not economic – or portfolio – altering events. There was no reason to imagine this current flu outbreak could lead us to the current social distancing economic lockdown no matter how obvious it might seem in retrospect. I don’t think anyone could have predicted the Stay at Home orders, shutdowns of businesses or major runs on toilet paper.

Having said this, you don’t have to ask why Wall Street traders abandoned stocks in near panic mode. Our nation has never been confined to our homes before. Economies on a worldwide basis have been never been shut down. It’s an economic ice age. The coronavirus epidemic has raised so much uncertainty. The need for the $2.2 trillion dollar CARES bill makes sense when we consider that economists at the St. Louis District of the Federal Reserve Board are now predicting that the short-term unemployment rate will reach 32%, which is higher than the 24.9% rate at the worst point of the Great Depression of the 1930s. A record-shattering 10 million people have applied for unemployment benefits in just two weeks. I don’t want to scare you, and I do NOT believe we will end up in a Depression. This is temporary – hopefully, just a few months at most, as people who are unemployed will have juiced up cash flow that was not available in the Depression. In fact, there was no such thing as unemployment insurance. With so much of our economy shut down until further notice, it is clear to most of us that we are already in a recession. How long and how deep ultimately depends on getting people healthy, and back to work.

Those of you who are of a certain age may remember the Roseanne Roseanna Danna character from Saturday Night Live signature line: “It’s always something”. She might be right. And if you’ve remembered the character, then you’ve also witnessed several crises over 30 years. You have also survived and even thrived during these more than three decades, and we have no intention of letting this one be different. To be clear, yes – we are facing another “once in a lifetime”, statistically impossible, market decline – and it is scary! You might feel stressed, cooped up in your house, unable to go to the gym, and go out to dinner with friends. Know that stress intensifies any negative thoughts and impairs your ability to think flexibly. I am not sure watching CNC, CNN or Fox 24/7 is adding much to anyone’s peace of mind.

There are a lot of us with big shoulders at Key Financial and we’ve been through times like this – and worse – before. We are all working 24/7, but there IS one thing we cannot do: Protect you from the virus itself. Please let us worry about your financial affairs.

This way, you can focus on remaining safe and healthy.

The impact of the Coronavirus is a painful reminder of how quickly the landscape can change: A virus that started in a province in China is now in 114 countries, with 125,000 cases worldwide, and 4,600 people have died. The majority of those deaths have been in China, where air quality is poor and close to 90% smoke cigarettes. Within three weeks of identifying the virus, the United States has 1376 confirmed cases and 36 deaths. According to public health officials, it is popping up in atypical places – sometimes with no epidemiological or logical link to the original outbreak in China. Mild (or absent) symptoms in some people means that this virus is all but impossible to stop.

As most of you know, my team and I have been through many bear markets, and while the catalyst is always different, we know what to do while it is happening. I believe that providing you with updates, insights and perspective in all economic and market environments is critical to the standard of care at Key Financial. I am going to give it to you straight: this is not going to be easy. Equally, or perhaps more importantly, we are doubling down to protect you from the ravages of the market response. These actions are core to our mission, and the events of the past three weeks makes this even more critical.

We are at an inflection point. Containment methods such as quarantines, limiting large gatherings, and avoiding unnecessary travel are steps that China has shown can reduce the spread. Mitigation includes washing hands, avoiding physical contact, and social distancing (an arm and a half away).

Scientists report that the cellular makeup of this virus is very similar (85%) to SARs. A vaccine was developed for SARS but by the time it came out, it was not needed. I do not know a thing about making a vaccine, but the report suggested this could accelerate the discovery. While it can be spread through surface contact, it has a fragile shell and is not stable. Disinfectants can work. That’s good news.

The bad news comes from Dr Anthony Fauci, the Director of the National Institute of Allergy and Infectious Disease. He announced that this virus is 10 times more lethal than the seasonal flu. According to CNN, there are 34 million cases of seasonal flu with 20,000 deaths this season alone. Ten times is pretty significant. Until we get testing kits out to health facilities and labs, we really aren’t going to get relevant data. This crisis is only two months old, and credible data is sparse.

Despite a nice recovery in the market on Tuesday, it now appears that the investment markets are in full panic mode. The World Health Organization has declared the Covid-19 virus to be a global pandemic. Traders on Wall Street are selling at virtually any price, which is causing the markets to drop deeper into bear market territory. Trading was halted again this morning, and the Dow is down another 8%. (10:04 am on 3/12/2020).

It is almost impossible to keep a rational perspective in the middle of a herd that is stampeding toward the exits. This particular stampede can fairly be described as one of the worst in market history. Michael Batnick, director of research at NYC investment manager Ritholtz Wealth Management, noted this is the fastest bear market ever. That is, the fastest that the U.S. stock market has experienced a decline of 20% or more going back to 1915. The average number of days from peak to a 20% decline is 255, and the median is 156. The recent market selloff reached this dubious achievement in just 17 trading sessions.

The long bull run that started in March 2009 and set many records along the way, is now officially over. We thank the market for the businesses it helped to grow, the dividends it shared, and the wealth it has created for so many Americans over the past 12 years. The markets have effectively erased the gains from 2019 with the S&P, trading at about where it ended in 2018. Fear is dominating the markets and is building on itself. None of us know when the bleeding will stop.

What I do believe is that it will stop, and I think it will do so sooner rather than later.

Once health precautions are taken, it is appropriate to address the potential for losses, and how best to navigate the market conditions. It is clearly disrupting economies on a worldwide basis, and consumers are pulling back. Companies are changing the way they do their work, and employees are being encouraged – and in some cases mandated – to work from home. There are concerns about corporate earnings and liquidity. Some companies and even industries such as cruise lines are at risk. President Trump spoke last night proposing a payroll tax cut, and bailouts of key publicly traded companies in the travel and entertainment industry. The Federal Reserve Board has cut a key interest rate by half a percent – and is providing liquidity for the credit markets. President Trump knows that his re-election is dependent on a fiscal response to the crisis and mitigating the damage a recession can cause.

Research analysts at Goldman Sachs took a look back at the three types of bear markets:

1. Structural Bear Markets – Threats to our banking systems such as the one that occurred in 2008
2. Cyclical Bear Markets – Recessions from the business cycle
3. Event-Driven Bear Markets – Completely unexpected

Of the three, structural bear markets tend to be deeper and pose the greatest threat to our financial system and economy. Cyclical bear markets typically occur due to an economic recession, while the third type of bear market is triggered by events such as war, oil price shocks or an emerging-market crisis. They found that the average event-driven bear market resulted in a 29% decline. The report notes that we have never before entered a bear market due to a viral outbreak, but in the past, bear markets triggered by “exogenous shocks” have recovered their previous levels within 15 months.

There is some good news for many investment portfolios: The 10-year Treasury yield experienced its biggest weekly drop since December 2008, and bonds have provided a critical buffer for diversified portfolios. While we do not expect large gains from fixed income, they provide far fewer volatile swings and give us a viable option for clients needing distributions from their portfolio.

In fact, if we are to panic about anything, maybe it should be to rush to refinance a mortgage. We haven’t seen the 10 Year Treasury Rates we’ve seen this week – ever. Who would have thought we would breathe a sigh of relief to see the 10-year Treasury Yield closing at .72% yesterday? On Monday, it was at .31%.

The harder conversation is about market timing. Most people understand that it is impossible to time the market without a crystal ball. This is easily forgotten when the daily headlines announce that your net worth is falling by 4 – 7% in a single day, and when the stock portion of your portfolio has fallen by 25% in record time. The natural question is: should I get out now and avoid more of the same?

There is only one rational answer to this question: it has never been a good idea to sell when everybody else is selling, just as it has never been a winning strategy to buy stocks when everybody else is wildly bullish. The best strategy has, in the past, been to ride out the downturn and experience the subsequent upturn – which may come tomorrow, next week, next month, or next year.

Make no mistake: bear markets like the one we have just entered pose a real danger to your future financial health. The danger is not in the drop itself; the real danger is in selling at the bottom and then missing out on the recovery.

One last thing: As we read the headlines and listen to the news reports about the Coronavirus, please remember this:

1. Most Americans will not get it.
2. Of those that do, 99% percent will recover.
3. 80% of those that get the flu may not even realize they have it or have very mild symptoms.
4. Gilead has a drug called Remdesivir that was created to treat Ebola. It is being tested for possible use for patients with the Coronavirus. A report that aired last night on Fox News indicated that it is “helping”.
5. We have the finest health system in the world.

It is more important than ever that we remain as available as possible for you. I also need to be a responsible CEO and take care of the people who take care of you. I believe face-to-face meetings provide valuable context and perspective, yet we have a significant number of clients over the age of 60. Therefore, I think the responsible action is to encourage that meetings be conducted over the phone. We are taking this day-to-day, week-to-week, and we will reach you by phone or email if you have a meeting scheduled over the next week. While employees at Key Financial are healthy and coming into work, we are also prepared to have our staff work from home. We are so lucky to have such a deep bench who are working so diligently behind the scenes. I am honored that they chose to work for you and me, and grateful for their willingness to be “on-call” day and night.

Collectively, our commitment to you is greater than ever.

Sources:

• https://theirrelevantinvestor.com/2020/03/09/the-fastest-bear-market-ever/
• https://finance.yahoo.com/news/coronavirus-and-trump-are-causing-stock-market-panic-and-investors-are-powerless-195953674.html
• https://www.bloomberg.com/news/articles/2020-03-11/coronavirus-a-pandemic-who-says-in-urging-governments-to-act?
• https://www.marketwatch.com/story/goldman-sachs-analyzed-bear-markets-back-to-1835-and-heres-the-bad-news-and-the-good-about-the-current-slump-2020-03-11?siteid=yhoof2&yptr=yahoo
• https://www.marketwatch.com/story/boring-bonds-turning-into-best-investment-of-the-year-as-treasurys-see-returns-north-of-20-2020-03-06?siteid=bigcharts&dist=bigcharts
• https://www.bloomberg.com/news/articles/2020-03-11/virus-is-at-bear-stearns-moment-and-may-get-worse-summers-says

First and most importantly, I hope you and your loved ones are well! While we have never experienced a crisis like this in our lifetimes, I do find comfort in knowing that those I care about are in this with me. There is a certain solace in knowing that you are not experiencing hardship alone. I want you all to know that every single member of my team has stepped up and we have implemented a system to continue our operations to serve you seamlessly. Through their creativity, dedication and sheer will power, YOUR Key Financial team is continuing business, as usual, to service our clients in every possible way and although you may be mandated to stay in place – you are not alone!

I have always given it to you straight; and we are all seeking answers and solutions right now. This is how I see it – my executive summary if you will. We are likely entering a severe, but perhaps a short-lived recession. The length of the recession depends largely on fiscal stimulus and containing the COVID -19 outbreak. Federal and state governments are working on such measures. Investors may hear comparisons to the Great Depression, but that was a time when monetary and fiscal responses were poorly constructed, and welfare programs that help respond to recessionary pressures did not exist. In the last six times the S & P 500 index dropped 30% from a peak, the index was up, on average, 25% in the next five years, excluding dividends. While volatility will persist for some time, it is important for investors with medium – to long-term horizons to remain invested, dollar-cost average, and rebalance as needed.

So, while the short-term may look dire, I truly believe the long-term outlook is hopeful. Short-term projections turned rather bleak as last week ended. But there were still reasons for hope. In response to the weakening domestic economy, the Federal Reserve in partnership with the Treasury Department announced on March 23rd, a massive new program that will include the purchase of Treasuries, asset-backed securities, corporate bonds and municipal bonds along with a direct lending program to corporations. The focus this week will remain on much sought-after fiscal stimulus from Congress. With a significant fiscal stimulus, the recession could be short-lived. Both political parties, along with the President, seem to have a sense of urgency and with the proposed size of the stimulus package (about 9% of GDP), it is in line with what economists would expect for a recession as deep, although not as long, as the Great Recession. In conjunction, the Federal Reserve has reduced the federal funds rate to close to 0% and implementing the extensive purchase of bonds to further reduce interest rates. I believe this collaborative response is more likely to preserve confidence and capital while we are all doing our best to shelter in place and contain the spread of COVID -19.

I am not saying the market volatility has not been unsettling. But I am also a firm believer in trends and staying the course with levelheaded decision making. I would like to share a table that outlines how the S & P Index has reacted in the prior six occasions on which it has declined more than 30% from its peak (as of March 20th, the index was down 32% from its February 19th peak). The table below outlines the change in the level of the S & P index, excluding dividends, in the months and years following a 30% decline. Except for the Great Depression, the index proceeded to have positive returns in the following three and five years. The average for three and five years would be significantly higher if the Great Depression were not included.

In conclusion, we are all here to support you as we navigate these times of uncertainty together. Knowledge is power and I remain committed to sharing everything I can with you, as the information becomes available. Remember that the very foundation of your portfolio management is financial planning. My team is dedicated to adjusting course with your portfolios as needed and protecting your assets for years to come. In the meantime, please take care of yourself and your loved ones.

As you probably know by now, Governor Wolf has ordered “Non-Essential” businesses and offices to close to prevent further spread of the Coronavirus. As mentioned in my previous communications, I had already implemented our own “Plan B” and most employees have been working from their homes for over a week now. This was done in an effort to keep our devoted employees and their families safe, while maintaining services seamlessly. Our VPN is working well, and we are increasing capacity and bandwidth to make sure that continues. Our systems have worked beautifully.

It is important for you to know that we are here if you need us. Here is the protocol:

1. Phone calls are being rerouted to Susan Frost’s cellphone, and she will be taking messages and contacting the appropriate team member. If you get our voicemail, that means Susan is on another call or unavailable and the call is forwarded to Bernadette’s phone. It might take 6 rings before that happens, so hang in there! Our voicemail system then sends an email to Bernadette’s email address, which many of us have access to.
2. If you need to contact us, I would encourage you to send an email. Our entire team is standing by- ready to help you, and many have willingly offered their personal cellphone numbers so that you can get to them directly. In order to respect their family and private time, I am leaving that decision up to each employee. If you need a phone call, feel free to email us first, and we can call you back right away.
3. By the way, you have all been incredibly cooperative and understanding – the phone has NOT been ringing off the hook, a very good sign in times like this.
4. Each team member has, and continues to proactively reach out to all of our clients, and the feedback I have received has been tremendous. This is not to say you – and many of our clients – are not concerned; of course, you are. This virus came seemingly out of nowhere and the outcomes for all Americans are uncertain. Markets are down 35 -40%, with some individual holdings, hit even harder. Certain areas of fixed income (bonds) are also down, but not nearly as much as equities. I still believe this is very temporary, and understand that each day feels more like a year.
5. For the record, we are concerned as well, but not about the longer-term viability of markets to function, and values of corporate America to reflect their true intrinsic value over time. When securities are sold indiscriminately, we do not believe prices are an accurate judge of a corporation’s ability to generate earnings over the long term…10-20 years. There is no question that earnings will take a hit in the near term, and markets may be volatile. To be realistic, I think this will continue to be the case until we get accurate numbers regarding the number of people getting the virus, recovery vs. mortality rates and the impact on our health care system and economy.

   On this point let me be clear: Bear markets don’t destroy wealth – it’s how we react and what we do in bear markets that either destroy wealth or create it.

   Let’s recognize that we are all part of the human herd. By that I mean that it is human nature to want to sell and get out of the way of whatever the market does in the unpredictable future; that’s our brain’s instinctive “fight or flight” reaction. In fact, you can create certainty by retreating to the sidelines. Unfortunately, acting on that need for certainty creates a certain and permanent loss. This is precisely why investing is not easy, and why I want you to rely on our experience. We’ve gone through other times of extreme stress and dislocation: We know what to do.

6. The other thing I am not concerned about is our ability to serve you. Our commitment to you is stronger than ever, and our back up plan is working.

Last but certainly not least: Thank you so much for your messages of love and support. Your responses have warmed all of our hearts and reinforce the feeling that we have the most incredible clients in the industry. (Yes, we are completely biased!). I’ve heard wonderful stories of compassion and helping others, and funny stories about how families are dealing with their temporary reality. One family with four young children told me about the “dorm room” set up in their dining room, with all 4 kids on their computers keeping up with school assignments. I couldn’t help but ask where the keg was hidden.

My name is Brad Everett, and I am the Chief Investment Officer here at Key Financial. Patti is on her way home from a speaking engagement in Australia and in the spirit of seamless (and continuous) attention to your portfolios, I wanted to give you a sense of some of what we’re thinking at this time. As you probably already know, financial markets around the globe have been experiencing increased volatility over the past several weeks, and especially in the past few days, with the S&P down just north of 7% between Friday and Tuesday. As of this exact time, the S&P is up about 1.5% out of the gates here, but we’ll see what the day brings.

Much of this has been attributed to the continued spread of the Coronavirus. There has been an increase in confirmed cases outside of China – including Italy, Iran, Japan, and South Korea.

A natural question to ask is how this might affect your investment portfolio? I wish I could say otherwise, but we have no idea. Will the slowdown in China continue? With the increase in other nations continue? Will the spread of the virus slowdown in the summer, giving researchers some time and a chance to create and produce a vaccine? We won’t know until it’s over whether history will repeat, but we do know how the market has responded to previous health scares. From BobVeres.com:

“When the public became aware of the SARS epidemic (a previous strain of the coronavirus) back in 2003, the S&P 500 index fell 14% over the subsequent two months, from mid-January to mid-March. But, according to a historical look-back by the MarketWatch economists, the market was up 20.76% a year later. The Avian flu outbreak in 2006, the Swine flu outbreak in 2009, the Ebola outbreak in 2014 and the Zika epidemic in 2016 saw initial downturns between 5.5% and 7%, but a year later, the markets had recovered by between 10 and 36 percent. We can note that the S&P 500 index fell 3% in the two weeks after January 17, when the coronavirus outbreak first made headlines. Since then, the index has bounced back to all-time highs.”

Again, we don’t know the ultimate impact, but the market doesn’t like uncertainty, so we tend to react first by overreacting (the stock market, especially). Is it likely that a virus can decrease the full discounted value of the largest 500 companies in the United States by 3% in a single day? Or 7% in 3 days? Here are a few statistics to put some of this volatility in perspective:

• Multiple sources (WSJ and Barron’s) have estimated the potential economic cost at $400 billion (if the bulk of the cases stay in Asia) or as much as $1.1 trillion if it continues to spread around the world. That sounds like a lot of money. It is. But the total GDP of the world in 2018 was approximately $85 Trillion. A $1.1 trillion cost is approximately 1.3% of global GDP. As a comparison, the US GDP fell 4.3% during the Great Recession from the peak (late 2007) to trough (2nd quarter of 2009).
• The value of publicly traded equities grew over $17 trillion in 2019. A three-day, 7% drop in the S&P took us back only to mid-December values. I don’t want to dismiss a 7% drop in the S&P, but we were only recently celebrating all-time highs on the S&P, and after the past few days, we’re still very close to that.

Ultimately, despite the volatility in the market, remember that we started first with a financial plan specifically for you, to represent your goals and plans. Stock market investing is, by its nature, a long-term proposition (as of 2011, in Nick Murray’s book Simple Wealth, Inevitable Wealth, he calculated that 89.5% of all 5-year rolling periods on the S&P 500 have generated a positive rate of return and 96.4% of 10 year periods. This is what we mean by long term. Not 1 month or even 3 years). No matter the source of volatility, it has always come and gone and will come again, and we need to expect it at any time and prepare for that. Your individual asset allocation is built with that in mind. For those of you taking distributions or will be in the near future, we have been able to plan for how much you need and when you will need it. The earmarks we’ve set aside for near-term withdrawals are invested in asset classes that have shown significantly different return and risk characteristics than the S&P specifically, or equities in general. We’ll continue to monitor this on a daily basis and please let us know your thoughts, how you’re feeling, and if you have any questions.