My first communication to you regarding the coronavirus was January 30, and I know the events that have unfolded since that time are taking an emotional toll on all of us. The virus’ impacts on our lives cannot be understated. Our minds are racing with thoughts of death rates, job losses, business closings, financial hardships for individuals and families, the continued need for social distancing, competing and conflicting priorities, and the potential implications of significant market volatility. Not to mention our small business owner clients who've been racing to apply for COVID-19 relief funding only to be frustrated by it drying up almost instantaneously upon becoming available. All this while our public officials are working to develop plans to allow portions of the economy to reopen.
The sustained stress and anxiety resulting from the impacts of the virus make us all feel vulnerable and may cause us to question the well thought-out plans we put in place during a calmer more prosperous time. It would be highly disingenuous to think any of us can simply dismiss what we are experiencing while trying to focus on the critical tasks of our new daily routines. Our emotions and the potential impacts they have on our health and wellbeing are real. We need to give ourselves time to acknowledge what we are feeling as we manage to take control of the things we can and become mindful of the things we cannot.
Underlying many of our emotions are fundamental concerns regarding our livelihoods and lifestyles. Although, the specific circumstances of the coronavirus are different from past crises, the human response to crises and related market impacts has been well documented, most recently in an article by Russell Investments.
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When things are great, we feel that nothing can stop us. And when things go bad, we look to take drastic action. Because emotions can be such a threat to an investor's financial health, it is important to be aware of them. This awareness can then protect you from the negative consequences of impulsive and irrational reactions to these emotions.
Here are two resources that may help you and your family manage through this crisis.
- VeryWell Mind is a trusted and compassionate online resource that provides guidance to improve your mental health and find balance. Their library of more than 4,000 pieces of content, created and refined over the past 20+ years, has been written by more than 100 healthcare professionals and industry experts including experienced doctors, therapists, and social workers, and then vetted by board-certified physicians.
Discussing our emotions, concerns, and challenges is a valuable exercise to maintain a healthy perspective and to relieve stress and anxiety. Please continue to reach out to me or any member of my team anytime and as often as necessary. We’ve been in contact with many of our clients daily, in some cases simply to listen.
The Markets
Despite the past two days of declines, we’ve experienced about a 20% increase in major US stock market averages since the lows of late March. While this has helped to provide some relief for investors, we believe it’s too early to signal the all clear. The global economic recession and stock market weakness we are experiencing was brought on by a health problem. Until that health problem is met with a health solution (treatment/vaccine), it’s unlikely we will experience a sustainable recovery.
Given the continued uncertainty regarding the duration and depth of the impacts from the coronavirus on multiple facets of the economy (for example, crashing oil prices and the energy markets), the potential risk of resurgence of infections as government officials begin to reopen the economy, and the lack of a treatment or vaccine,
we should expect the possibility of significant market volatility, a revisiting of the lows in March and possibly even new lows in the stock market - during the short term.
Despite all this, we have prepared for the possibility that markets would surprise us to the negative, and our education about market behavior over the long run has paid off. We know the best way to achieve our long term goals is sticking to a sound investment strategy and keeping our emotions in check – easy to do when times are good, incredibly important to do when times are challenging, as they are today.
If history is a guide to the future, our nation has proven to be resilient and resourceful – medical treatments and vaccines will be developed, the economy will begin to reopen, and markets will eventually stabilize and grow. As the chart below indicates, historically, epidemics/pandemics and other significantly disruptive events have had relatively minimal long-term effects on stocks.
While its certainly possible the impact of this event will present long term challenges, our conviction remains that returns will likely be higher from stocks in the long run (next 5 to 7 years) when compared with alternatives like annuities, bonds and cash - which currently offer very low relative returns that are in many cases below inflation.
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There are many reasons to be hopeful:
- We are bending the curve of the rate of infection. The steps we are taking, although difficult, are working.
- There is a tremendous amount of effort in the medical community to develop treatments and vaccines. The roll out of a health solution to this health problem provides the best hope for a more sustainable stock market recovery.
- Estimates now suggest that 99% of people infected with the virus will recover.
- The Senate just passed a nearly $500 billion coronavirus “Phase 3.5” relief bill that would replenish the Payroll Protection Program (PPP), provide hospitals with an additional $75 billion, and implement a nationwide virus testing program to facilitate the reopening of the economy. The House is set to vote on the latest relief bill this Thursday.
- Our “essential workers” across the spectrum of service and manufacturing sectors, from hospitals to grocery stores to gas stations to medical supplies, are going above and beyond, and in some cases risking their own lives for the greater good of the communities in which they live.
- Technologies available today are allowing many of us to work from home, meet virtually with distant family members and friends, and access much needed information and guidance on how to maintain our physical and mental health.
- We are finding ways to be resourceful and adapt to our new environments – we will be better prepared for the future as a result of what we are learning today.
In closing, know that the entire team at Financial Independence has your best interest in mind. This is a difficult time for all us. It is also a time we have diligently prepared for over years designing financial plans and investment strategies aligned to your values and priorities. Helping each client live his/her
BEST Life helps us to live ours.
Thank you for giving us the opportunity to be present for you – answer your questions, provide you with reassurance, develop solutions to address your pressing needs, and in some cases, make adjustments to your investment strategies to take advantage of current market conditions.
At some point in the future this situation will be behind us and we will go forward more resilient, resourceful, empathetic and prepared for the next crisis that will inevitably come our way.
“Every adversity, every fail, every heartache carries with it the seed of an equal or greater benefit”
Napoleon Hill
Please call any time and as often as necessary. We are here for you and your family.
Be well,
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Rick W. Campbell
MBA, ChFC®, BFA™, AIF®
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Financial Independence
931 Jefferson Blvd
Suite 2005
Warwick, RI 02886
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Financial Independence, LLC is a Registered Investment Advisor firm and only transacts business in states where it
is properly registered, or is excluded or exempted from registration requirements. Registration as an investment
advisor is not an endorsement of the firm by securities regulators and does not mean that the advisor has attained a
particular level of skill or ability. All investment strategies have the potential for profit and loss. Past performance does not guarantee future investment success. Always consult an attorney or tax professional regarding your specific legal or tax situation. Copyright 2020.
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