Don't Make it Worse by Being a Sucker

Our firm was founded in 1982, one of the advantages this longevity affords us is that we have seen a lot over the years. In each of the past crises there has always been an uptick in the peddling of dubious investments. Radio, television and media ads (including Facebook and other social media) are filled with advertisements to “protect your portfolio” to “diversity out of stocks” or to buy their software so you can trade in the markets with impunity. Our advice to you: don’t be a sucker. Many people make bad decisions when emotions run high, because there are great salespeople out there to take advantage of fear.

You will see ads about annuities and life insurance policies that have the upside of the stock market and no downside (spoiler alert, those investments over the long run are designed to return Certificate of Deposit like returns and the life insurance salesperson collects their 5-8% commission up front). Or maybe you should diversify into real estate buy purchasing a non-traded Real Estate Investment Trust because “it’s always a landlord’s market!”. These investments, like the annuities and life insurance policies, have high fees, high commissions and are illiquid for many years. They are designed to reward the salesperson, not the buyer. As we have written many times in the past, if you attend a free lunch or dinner sales pitch, it could turn out to be the most expensive free dinner you will ever have.

A few words of encouragement are due at this point. Yesterday China announced that it did not have a new case of Coronavirus in the original center of the outbreak. This shows social distancing can work as long as everyone takes it seriously.

Since 1945, according to the National Bureau of Economic Research, the US has entered a recession about every 5 years. According to CNBC, the average market decline in the S&P 500 Index when the country is in a recession is 32%. This is about where the market is from its highs of February 19^th, which seems a very long time ago! During the bear market of 2000-2002 and 2008-2009 the S&P 500 declined by over 50%. If this is an “average” recession we are probably near the market lows. If this will be a more severe recession then we have more room on the downside, but we are much closer to the bottom than we were just a week ago.

These are certainly unusual times and the market has been extremely volatile because there really isn’t a playbook for global pandemics. We have gone from, don’t worry it’s not even as bad as the seasonal flu, to don’t leave your house. It could be that so much bad news has been priced into the market that any little shred of good news, or not too terrible news, might help push the markets higher. Timing the market is never possible, and right now it is probably even harder than usual. Jumping in and out of the market is not an investment strategy, however, if you are worried and losing sleep, we strongly encourage you to call us. We are all in this together and we believe, that staying balanced and diversified will see us through this crisis as well.

The Bond&Devick Team