The market fear related to the coronavirus continues today due to the uncertainty of the economic impact and the travel bans to curb the virus spread. Our view since our last message has not changed. The fear level suggest a bottom is near and one has to risk that we are not at the bottom so we are there when it turns. This is the quickest move in history from a market high to down 20%. Rapid drops also have ended up being followed by quick reversals. There is a lot of evidence that the quicker the move down, the quicker the ultimate recovery happens. A quick recovery is what forms the typical V-Bottom we have discussed before.

The market went into “bear territory” today. Keep in mind that this is simply a textbook definition based on the market retreating 20% from a high. Of the 12 bear markets since World War II, the 6 that saw the most rapid declines did not go down as much averaging 25% from market peak to ultimate bottom. This means that we could see a quick rebound once the bottom is in place relatively soon.

We strongly encourage our clients to be patient here. History proves that many people get hurt badly during a market in this much stress when they panic and sell prior to the strong recovery that has historically followed in time. As Warren Buffet was quoted, “Be fearful when others are greedy and greedy when others are fearful”. In hindsight, this will likely be viewed as a time of tremendous opportunity.

We are reviewing our strategy positions and client accounts and will make adjustments with the goal of being in positions which we believe will benefit the most once the recovery begins. We encourage our clients to look six months down the road and believe… this too shall pass.