As 2020 began, investors were hopeful for continued solid returns based on the generous returns of 2019. In a few short weeks, a threat no one could see coming changed all that. The COVID-19 virus morphed quickly from an issue in rural China to a threat to world health and financial stability. Many industries, such as travel and hospitality were forced to close and many small businesses closed their doors to institute appropriate social distancing to help stop the spread of the virus.
As the number of cases spread to more countries, global stock markets tumbled and several countries announced stimulus packages. The United States passed a broad $2.2 trillion offering relief to individuals, businesses, and state and local governmental entities. Tax filing and payment dates were extended among many other initiatives. Both large and small countries around the globe also passed massive stabilization plans.
This pandemic and the stimulus response led to historic volatility. The average daily change of the S&P 500, up or down, is historically less than one percent. In March, as investors dashed back and forth from fear to encouragement, the average movement per day was 5%. There were few safe havens as all sectors of equity markets fell. By the end of the quarter, the S&P 500 fell 20%. As a matter of perspective, keep in mind that large domestic equities rose dramatically last year, so the percentage drop is relative based on the 2019 gains. Still, while the results so far this year are certainly disappointing, we believe there is reason for investors to have confidence and hope.
As stewards of wealth, we believe that investing isn’t just buying stocks and bonds. It is an investment in the businesses and ingenuity of the United States and the world. Within days of the emergence of the virus, the power of those companies became evident. Just weeks later, a U.S. company announced the availability of a test that can detect whether an individual has COVID-19 within five minutes. Another company is developing a vaccine that might be broadly available in mere months. These are just two of many. The power of people and ingenuity are already fighting back.
Medical technology isn’t the only bright spot. Businesses in technology, infrastructure and communications are also helping get us through this new normal with unrivaled innovation. Not that many years ago, a mandate that most people must work from home would have been impossible and crippling to the economy. In millions of instances, including our practice that serves you, businesses are safely, securely and efficiently working from home.
You can feel confident beyond your portfolio when it comes to our relationship and your long-term goals. Our process for building client portfolios has always accounted for the uncertainty of the world and risks in unlikely places. We believe in prudence and discipline, so we typically diversify portfolios to include lower-risk assets like fixed-income and adequate liquidity for tough markets. Simply put, we design portfolios in anticipation of risk, not in reaction to it.
We appreciate the confidence you have placed in us and are committed to continue to earn it. We want you to know that we are here for you as we have always been. These difficult times have not changed that.
Our thoughts are with those who have been affected by this tragedy; those who are dealing with illness, pain and loss. Being part of a community means we are present and supportive during difficult times.
Please feel free to contact us if you need anything or would just like to talk. Together, we will get through this.