In 30 Seconds or Less …..

Just set aside your financial statements as they arrive this week. There is no point in looking. Why torment yourself as you know the first page with compare the 3/31 value to 12/31.  If only we could Return to Sender!

While the Dow has been on a tear, not all is rosy, yet ~

• We’re just getting our first look at earnings this week. We need time to see who’s poised for a rebound when the market opens up, who’s pulled down all their lines of credit, and who’s in trouble!
• We know now that 12 weeks is a good duration for an outbreak but is that the answer to our question?  Or will our economic slowdown be tied to 2^nd and 3^rd waves of outbreaks?
• The strong dollar is causing problems especially for oil prices and the global economy.

All this to say, the market can continue to trade in this range for a while with highs and lows. We still have not tested the bottom yet. So caution remains important. Again, if you’ve not talked to your financial advisor, you should to see if a little rebalancing makes sense. (And no, you don’t have to look at your statements to do that!)

In the Weeds –

After leaving the bank I’d been with for almost 10 years, I spent a fair amount of time getting my finances in order in January. I’d consolidated my old 401Ks, revisited my risk tolerance, reassessed our asset allocations, and beefed up our rainy day fund. All the things we’re supposed to do but in reality never have time for it with work, kids, and life! We even shifted some of the College 529 funds to a more conservation mix since we’ll need to tap those funds next year. I was so proud of myself! I remember saying, we’ve had a good run. I don’t want to lose anything at this point. I felt pretty certain that the economy had some head winds and a mild recession was on the horizon. Both corporate debt and consumer debt was simply too high. After reading an article from a former colleague and the CEO & Co-Chief Investment Officer of Dynex Capital Inc., Byron Boston, I too worried that the January market rally might actually be the last gasps of a bull market. In discussing my concerns with my financial advisor, I even said I felt like it would be an exogenous event (something unrelated to the market) that triggers the recession. That said, I never imagined a pandemic nor shutting down the U.S. Economy!

I was looking forward to seeing the first quarterly portfolio statement with all my nerdy little ducks neatly lined up ~ at least I was at the beginning of February! When the statement arrived yesterday, all I could hear was RETURN TO SENDER!  There is no point in opening it now. Ultimately, most of us will have 1 of 2 reactions or maybe both: 1) Distress at seeing the loss figure when compared to the rosy year-end valuation; 2) Or even more upset when the market tests the bottom as it has not as of yet. It’s just not worth the emotional roller coaster and exhaustion at this point! Put the statements in the drawer unopened and relax!

Why would we test the bottom? 

The Dow has been on a tear! – Yes, investors are looking through the dismal earnings that are coming out. They are trading on positive health news. Social Distancing is working across the country. Thankfully, that is all great news!  We talked about that being 1 of 4 items needed to build a strong foundation.

Duration – The duration of 12 weeks seems to be valid for an outbreak. But here in lies the challenge, we need more information about the virus itself or a vaccine which many say is 18 months away. Will the virus wither in the heat of the summer? Some experts say yes and some temper their enthusiasm pointing out our nicely air-conditioned office buildings and stores that are ideal temperatures for transmission. Then there are the other scientists that say we have no idea if heat will impact the virus at all. Are we looking at 2^nd and 3^rd waves of hot zones like Singapore? The scientists need more time to study the virus. We need more time to understand the duration question.  So far, so good. Fingers crossed! 

Bridging the Economy & Stabilizing Markets – Lawmakers continue to work through another stimulus package. It’s very important that lawmakers choose the right combination of tools to get funds to the various targeted populations. Otherwise, there can be unintended consequences which harm one group over another. In this environment, it’s especially important to lift all groups!

The Federal Reserve continues to be a Rock Star! Not only are they stabilizing our domestic economy but they are also supporting international markets, far more than other central banks. Because of this, international investors are looking for safe harbors in US dollars and assets. It’s making it more tricky for the Fed to get the US Dollar to float back down to a good trading range. 

Why does it matter where the dollar trades?  A stronger dollar means that it costs more for US goods to be purchased abroad. As a major exporter of oil, the higher dollar continues to harm the already battered energy sector. US oil prices gave up its win from Sunday’s truce and is now below $20 a barrel. (Oilprice.com) Internationally, it costs a lot more to service loans in emerging markets and sovereign debt often written in US dollars. It further hampers the global economy.  So as we talked about on April 3^rd, the dollar is trading too high to support a solid US or Global Recovery.    

A New Frontier in Valuations – We are starting to get our first real insights into earnings as they come out this week. Some firms continue to pay dividends despite much skepticism and several with fully drawn down lines of credit. Bankruptcy fears are rising with talk of 2^nd or 3^rd waves of the virus.  We need more time to digest who will recover, who will not and who’s iffy. There are definite winners to be found for sure!     

So what do we do?

As always, focus on keeping yourself and your family healthy, skip your statements if you don’t need the money immediately, continue to be prudent with your spending, and help those in need in your community ~ small acts of kindness have big impacts!  And be your amazing selves!

#BeTheCalm!!! #Leadership!!!!

Stay Healthy!  Susie