Tudor Financial April 2020 Update Professional Investment Strategies Investing, Planning and Financial Guidance Since 1992 Serving Clients in Over 30 States

March 23, 2020 "I Know Where I Was" Have you ever reminisced with someone over some momentous event that occurred many years ago and they begin with the phrase "Yes, I know where I was when that happened...I remember it well." What is interesting is that many will not, in future years, even remember March 23, 2020 as a significant day at all. In fact, it may not even register any significance to those reading this commentary at this very moment. However, given our vocation and interest in the topic, it is fresh enough on our minds to give that day its due in short-term history. That day represents (thus far) the day markets bottomed in what will now be known in the history books as the fastest correction and bear market in history. It was on that day that the Dow 30 hit a low of 18,214 - a nearly 12,000 point drop from its all-time high set on February 19th a mere thirty-four days earlier. March 23, 2000 also marks the day the S&P 500 declined 35% from its all-time high. In the meantime, even as this recovery has occurred, we cannot make intelligent commentary on market direction going forward considering the unprecedented nature of the cause of declines. There is no history to draw on to divine market outcomes from a forced shutdown of the economy. It is important to recognize that media-blitzing market forecasters in this era are throwing darts, not reciting science. Market seers are forecasting everything from a second great depression to utopia in coming months. We do know that horrendously bad economic news (and we do mean horrendous) will continue to flood media outlets. The economic impact of shutdowns will be enormous for both businesses and households. Each day of shutdown will cause hundreds, if not thousands, of businesses to close permanently. (3) Economists are asking how much impact 22 million cumulative unemployed (1) will have on the economy and on the financial self-sufficiency of millions of households. This represents a record fast parabolic rise of unemployment. Economic and industry revenue and earnings numbers will assuredly suggest the economy is now in serious recession territory, even while the formal definition of a recession is for two successive quarters of economic contraction. The Conference Board, the arbiters of recession pronouncements will certainly let us know. However, don't hold your breath, the formal recession announcement usually occurs many months after a recession has already ended. At that time, we can thank them for their needless insights. Despite the gloom, there are huge glimmers of hope. Worldwide shutdowns will ultimately loosen up, and countries around the world will rally behind new research and healthcare protocols. We may be in a new realm where employees, somewhat spoiled, will likely beg to work from home. Fewer road accidents, yes, but fewer office buildings too. We live in interesting times.

Looking Back on Commentary

In prior communications we noted the recent February/March market downdraft was of the magnitude of a bear market, but behaved similarly to the swift declines of a correction. These were our comments: "The good news is that quick market declines are almost always followed by faster than average recoveries. Information is digested, the unknowns dissipate, markets then "know" and can heal. Alternatively, typical bear markets (20% or greater declines), drag on and on for more than a year. (5) This commentary has proven accurate thus far (at least in the short term). When we ask to what degree markets have recovered since March 23rd, most woefully underestimate the extent of the recovery. As we write, markets have had a much faster than average recovery from March 23rd lows - now up 31%. (1) Ironically, this level of gain is construed in the silly academic world of investing as a new bull market.. .all within three to four weeks. Welcome to a new bull market? Really? The current recovery suggests that panic selling out of equities (or any significant similar risk reduction move) anytime in the last six weeks has been detrimental to returns.

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High-Paid Expertise Pensions spend extraordinary amounts to hire high savvy employees and credentialed advisers. One such plan is The California Public Employees Retirement System (known as CALPERS) - the largest public pension fund in the United States. Recently, according to Bloomberg.com, the pension professionals at CALPERS decided to eliminate a safety hedge that would have created a 3,600% return during recent market downdrafts - this action caused the pension plan to miss out on more than a billion dollars of gain. (4) This decision occurred within mere weeks of recent declines. This speaks to two issues: One - It is impossible to consistently predict markets Two - Studies suggest that credentialed and highly paid pension advisors have done much to damage the long-term returns of large pension funds (6)

Times Are Good for 401(k)'s

$100,000 invested at the beginning of a ten year period with compounded returns of 8% annually grows to $215,893. As an alternative, $10,000 invested annually over a ten year period earning the same 8% return grows to only $144,866. Investing early is clearly more beneficial due to the benefits of compounding a larger upfront balance over a long period of time. Note that 401(k) participants invest in a pattern similar to the second scenario. When Do 401(k) Participants Gain Incremental Advantage? 401(k) participants have marvelous opportunity to gain some advantage over their early investor contemporaries by continuing their contributions into market declines. Their fixed dollar contributions buy less at market tops and much more during market declines. In addition, their investment contributions create the illusion that accounts have declined less, thus lessening the risk of panic allocation changes during declines. For these reasons, 401(k) participants are big beneficiaries of market declines. The last seventeen months (remember - markets experienced bear market declines in the fourth quarter of 2018 as well) have provided phenomenal benefits for established 401(k) participants. Fixed dollar investing (dollar cost averaging) works wonders during such declining periods - 401(k) participants that have continued or increased their plan contributions and made no panicked allocation changes in the last few years will see their retirement account values blossom as recoveries occur.

" “Far more money has been lost by investors trying to anticipate corrections, than lost in the corrections themselves.” Peter Lynch

Dow Industrial Index February 19, 2020 - 18,214 April 17, 2020 - 24,242 (1)

Enjoy the week... Grant S. Donaldson, MS, CPA

(1) yahoofinance.com, S&P500 historical data, Barrons, Morningstar.com, Vanguard benchmark returns (2) Information available upon request (3) Wall Street Journal, April 17, 2020 (4) bloomberg.com (5) Debunkery, Ken Fisher (6) Jeff Hooke and Ken Yook, “ The Grand Experiment: The State and Municipal Pension Fund Diversification into Alternative Assets ,”

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