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.