Investing In A Time of Covid-19

2nd Quarter Market Commentary

It has been a difficult two months for investors. But there is reason to hope, and we have a plan in place. First, let’s discuss where we are, how we got here, and what to expect next.

Since the February 19th peak, the S&P 500 Index fell 34% to its most recent low. While that’s roughly in line with the average bear market pullback, the rapid decline in the major indices is unsettling. The 34% drop occurred in just over one month, which is unprecedented.

But that shouldn’t be too surprising. What we are seeing in the economy is unprecedented, too. There is an enormous amount of uncertainty. Many industries that require person-to-person interactions are shut down, and the companies that remain open have far less traffic.

Uncertainty is expected to dominate corporate earnings, while also weighing heavy on the economy as a whole. Remember, there is no modern precedent to model economic forecasts on, the second-quarter projections for GDP have been incredibly wide.

If we connect the dots, we end up with economic uncertainty and  volatile markets. The best way to manage this going into the second quarter is to focus on the knowns.

Coma and recovery

In order to slow the spread of the pandemic, nearly every state has mandated or recommended that residents stay at home. Some local governments have issued similar instructions, with the federal government encouraging social distancing.  

While social distancing will slow the spread of COVID-19, the economic impact is unparalleled. In a way, the government is putting key sectors of the economy in a coma, hoping it will stem the spread of the virus. Eventually, the government will continue its role as doctor and use policy measures to resuscitate the economy  when it’s safe and healthy to do so. 

From what we’ve seen so far, we can expect the government’s resuscitation efforts to be extraordinary. The CARES act already goes well beyond what we saw during the 2008 financial crisis. And the Federal Reserve is acting as well, cutting the Fed Funds rate to zero and implementing several programs designed to support a wide range of bonds.

Together, the Fed and the Federal government are trying to prepare the economy for a strong recovery. Whether it works depends largely on the duration and severity of the coma.

The government alone cannot solve the challenges we’re facing. We must also hope for a vaccine and treatment. And we must hope for clarity on economic data. Everything has happened so fast — 10 million jobless claims in two weeks, versus 9 million during the entire Great Recession. Using economic data to measure the impact or issue an all-clear signal presents a unique challenge. Normally a recession is measured by several quarters of GDP contraction, but there is nothing normal about what we are experiencing. 

When it comes to stocks, markets collectively attempt to price in future events. Given the wide range of outcomes, volatility rules. But it’s important to remember that stocks are likely bottom and begin recovering before the economy does.

What this means for you

While we’ve never experienced anything like this before, we are always preparing for something like it to happen. That’s why I spend an enormous amount of time discussing the importance of your financial plan: It is our roadmap in good times and bad.

We base our plans on a simple premise: Stocks rise more than they fall, and the U.S. economy expands over time. Being in an economic and health care crisis can breed fear and uncertainty, but I am confident this pandemic will pass eventually, and these two facts will hold true. 

Resilience and ingenuity are part of America’s DNA. We will persevere and we will recover.

If you have questions, concerns, fears, or doubts, remember that you are not in this alone. Whether you want to discuss your business, your investments, or your overall financial security, my door is always open. 


Table 1: Key Index Returns

Dow Jones Industrial Average -13.7 -23.2
NASDAQ Composite -10.1 -14.2
S&P 500 Index -12.5 -20.0
Russell 2000 Index -21.9 -30.9
MSCI World ex-USA* -14.6 -23.9
MSCI Emerging Markets* -15.6 -23.9

Bloomberg Barclays US 

Aggregate Bond TR

-0.6 3.2

Source: Wall Street Journal,, Morningstar, MarketWatch

MTD: returns: Feb 28, 2020—Mar 31, 2020

YTD returns: Dec 31, 2019—Mar 31, 2020

*in US dollars