What a Period of Time We Are Living In
What a period of time we are living in. I read that we will look back on our lives and it will be divided by a timeline of BC and AC- before corona and after corona. I hope for most of us that the rest of our lives won’t be colored by this virus, but for some it surely will.
For many of us, it has been a time of adjustment, interruptions to our routines, inconveniences, many walks in our neighborhoods and actually meeting our neighbors. There are financial re-evaluations, and also spending much more time at home than we ever have (which can be good….).
But nothing traumatic like what some of the first responders in our country’s virus hot spots have witnessed. Or the fears of our healthcare providers and first responders have when they come home from work, hoping they are not bringing this virus home to their spouse and children. Or for friends, family members and neighbors who either lost their businesses, their jobs, who couldn’t be with an elderly family member at a critical time or lost a loved one to this virus. They will certainly feel this event for the rest of their lives. And we keep these people in thoughts and prayers.
But before we go any further, thank you to all of you and your family members who are work in the hospitals, grocery stores, convenience stores, first responders, helping with food banks and all the essential services that keep us going through all of this.
A big part of a successful journey through particularly stressful times depends on how we respond to stress. What we allow our mind to focus on is largely dependent on what we allow in our brains, and I recently heard a good suggestion on how to deal with stressful times and wanted to pass it along:
- On a piece of paper, write down on a left hand column the things that you are concerned about but have no control over:
- Things politicians say
- Financial markets
- Recent whacky weather, etc.
- On the right hand side, write things that you can have an impact on:
- How much news you listen to each day
- Calling an old friend
- Volunteering in something you believe in
- Reading something you value, etc.
Now, pick one item out of the right hand column every day and act on it. That is just one suggestion, but I believe we can agree that it makes sense.
About the economy and markets, one of the “left hand column” items in our exercise above - a huge change has occurred at a speed that we have never experienced. And any honest person will tell you that they really don’t know what the economy will look like in six months, 12 months or 18 months.
But that was also true four months ago - when many thought they knew what the economy was going to do. A group of “experts” were quoted in Barron’s annual roundtable saying there was no chance for a recession this year. A great truism I heard in early in my career - “You don’t get hit by the bus that you see coming down the street.”
So what do we do? We focus on the “right hand column” items. Stay diversified. We don’t make predictions, but we do observe where things currently stand. What can we observe now? Cash is paying nothing as the Federal Reserve has brought short term interest rates to zero. And Fed Chairman Jay Powell said at his press conference yesterday that these low rates are here for a while. The 10 year Treasury is currently yielding .59% - yes, just over ½ of 1% for the next 10 years. Corporate bonds are yielding a good bit more than Treasuries and the S&P 500 is yielding approximately 2%.
So for long term investors, do we think that stocks will do better than the .59% a year that the U.S. Treasury offers for the next ten years? Yes, but we don’t know it. And we don’t own bonds because we think they are going to make us rich. We own them because they can keep us invested by helping to diminish the damage to our portfolios that the inevitable equity market provides from time to time.
We realize that this has been a trying time for all of us, for some much more than others as previously mentioned. We are here to answer any thoughts or questions you may have as our country navigates its way through this. We believe that a steady hand, a disciplined approach and a long term perspective are the best approaches to this challenge.
Thank you and hope you and we are here for you and your family, please don’t hesitate to reach out to us if we can be of help.
Disclosure: There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. This material is being provided for information purposes only. Past performance doesn't guarantee future results. Investing involves risk regardless of the strategy selected, including diversification and asset allocation. The S&P 500 is an unmanaged index of 500 widely held stocks that's generally considered representative of the U.S. stock market. You cannot invest directly in any index. U.S. government bonds and Treasury notes are guaranteed by the U.S. government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. U.S. government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury notes are certificates reflecting intermediate-term (2 - 10 years) obligations of the U.S. government.