Moment of Truth

March 16, 2020
min. read

As I write this tonight, the market closed down 3,000 points in what was the worst percentage day since 1987.

Today marked another milestone – we closed today with a VIX of 82.69 which marks the highest close in recorded history of the market’s “fear gauge.” The VIX close today was even higher than the peak of the 2008 financial crisis and solidly states that investors are in complete and total fear.

We’ve come to a moment of truth: To panic out of or make changes to a well-designed long-term portfolio based on your life goals or…stay the course.

This decision is one that you will tell your kids and grandkids about in years to come.

The moment of truth is not a call for market bottom and doesn’t mean tomorrow or the next day will bring one either, but it is the time that you make a firm decision and go forward with confidence in your plan and your portfolio, believe that you can somehow now time the market or lose faith in the future entirely.

At The Gleason Group, like Warren Buffett we firmly believe that market timing is impossible and that now, more than ever, this time is not different.

This panic, like all others before it, will prove to be a terrifying, yet temporary event and a generational opportunity to those willing to see it and avoid making the “big mistake.”

Fears regarding the long-term prosperity of the nation’s best businesses make no sense.

These businesses will indeed suffer earnings hiccups, as they always have. But regardless of the impact of COVID-19 on the U.S. stock market, most major companies will be setting new profit records 5, 10 and 20 years from now.

The consistent theme from our discussions over the last few weeks is an overwhelming urge to just do something.

Many want to get out now, wait until things are better and then get back in since the market downdraft has no end in sight and is obvious to everyone it will be lower every day until, well, it isn’t.

While avoiding drastic action in your portfolio is critical during these volatile times, doing nothing brings about feelings of helplessness. This only grows as we are quarantined and shut off from the things we love to do on a daily basis and have the market making new lows as we did today.

We continue to focus on what we CAN do right now and how we can best channel our energies to help you through this trying time.

Portfolio-Related Actions

The key determinant for any portfolio action is absolutely related to the timeframe for the money, not the emotion of the market. We are firmly entrenched in a bear market and unless funds are needed in the next three months, we would highly advise against selling during this time.

If you need funds and do not have other sources, then we will look for options to create some additional cushion.

If you do not need any cash for the next three months, and your time frame has not changed, our advice remains the same.

The key during this time is to act small and be extremely purposeful with respect to your decisions.

Investing is not supposed to be easy. If it was, everyone would make millions. It’s not the portfolio itself that makes you wealthy, but rather your behavior around portfolio.

Discipline is extremely difficult during these times, yet absolutely critical.

What to Expect From Here

While we are not there yet, we are making substantial progress.We can also be sure that headlines will get scarier this week and probably next week, too.

It’s critical during this time to avoid only considering extreme viewpoints.

For instance, we want to avoid assuming the virus won’t be worse than the flu or thinking it will be a repeat of the 1918 influenza pandemic that killed millions. The same is true for the market: don’t assume things will soar back to new highs or that 2008 lows are upon us. The 2009 H1N1 flu infected roughly a billion people around the world but killed only 12,000 Americans. In other words, you can have a serious flu pandemic without it snowballing into a 1918 scenario.

Bottom line, we just don’t know what is going to happen, but that's ok.

This is in no way diminishing the seriousness of our current pandemic or making light of the loss of human lives. With respect to the market, investors mentally anchor to 2008 because it was the most recent recession. The 2008 recession was an exception, not the rule.

If you take nothing else from this writing is that, without a doubt, the news will get worse from here, but it's ability to shock us will diminish.

What is critical is that you must be fully prepared for both foreboding news about the contagion’s spread and even the death rate. We also want you to be prepared for the potential for unfavorable economic numbers in the near future, especially compared to the boom we experienced in 2009.

But as rough as the news will be, it's ability to shock us will diminish.

The shocks, and there are many shocks still to come, will continue.

But our reaction to them cannot remain at current intensity forever.

A Coronavirus Recession may sound like a reason to sell, but it’s not. Stocks typically rise starting 3–6 months before a recovery, and we’re likely already in that window.

Those who sell now will surely regret it.

What You Think You Become

Over the weekend I noticed throughout a variety of news reports a concerted effort to help on all fronts. All sorts of people making efforts to create and cultivate acts of kindness and support for those in need and most affected.

I read about the harrowing actions of our first responders in the healthcare community as well as so many others whose livelihoods are based on serving and caring for people.

Brave actions of citizens throughout the world reaching out to help others in their communities. Whether businesses, famous sports figures or just average everyday people, help is coming in droves.

We are about to get a waterfall of assistance from the federal government, businesses and our citizens over the coming days and weeks, the likes of which we have not seen in a long time, if ever.

There is groundswell of people helping people springing up all over the world to help those most affected. While there will be industries that suffer, businesses adapt, and there will new opportunities created.

Restaurants are now offering takeout and delivery options, and just today Amazon announced they are hiring 100,000 new employees to meet Coronavirus demand. It is absolutely critical that you not lose faith in the future and act accordingly.

A loss of faith in the future and conceding that “this time is different” is going to take you to a place of no return, literally.

While that may feel good today or tomorrow, in five or 10 years from now, your future self and your family will not feel the same way. ‍

Action Creates Change

Our goal is to communicate clearly, efficiently and as often as possible to provide you relevant and helpful information to help make informed and thoughtful decisions.

Communicating actions to take and highlight positive messages of progress, ideas and opportunities to help you and others during this time.

Helping us better understand the fear and take positive actions to make a real difference in the lives of our families and our community will help us not only get through this, but come out better than before.

At The Gleason Group, we’re doing everything in our power to make a difference during this difficult time.

If there’s one thing the history of America – and that of the world – has proven time and again, it’s that crises such as these bring out the best in all of us – our common decency, humanity and compassion.

We encourage you to share positive stories or ideas you find with our team, and we can then in turn share them with others.

Hang in there. This too shall pass.