The Prudent Retiree - What's Going On Part VII

The fear of COVID-19 continues to define the market. In a month’s time, we’ve traveled from a booming economy to a what is certain to be an economic contraction.  

Prudent Retiree needs to advise you based on where we are right now.  

As I write, the market is down about 25% from it’s all time high. Not good, but it’s happened before. Computer trading has markedly increased the market’s velocity and this has certainly been the fastest decline ever of this magnitude. Volatility and velocity are going to be with us for the time being.  

What should investors do at this point? NOTHING. We strongly believe there is now more risk to selling out than to staying in.  

The price decline has happened. The damage has been done. The market has priced in economic contraction and a recession. Certainly, prices may decline more, but we believe most of the fall has happened.  

Since the start of 2000, we have experienced two other major market crashes. The Dot Com/ 9/11 crash occurred first. The Dow fell from almost 12,000 in to about 7300 in October of 2002. By year end it was at 9000 and peaked in October of 2007 at more than 14,000. After that, we had the crash of 2008 and the market fell to about 6500 in March of 2009. By year end it was about 60% higher than the lows and peaked at close to 30,000 last month.  

The lesson is that those who came out best were those who remained invested once the damage was done.     

We are there now. There have been other crashes and the market has recovered. There have been other unknown viruses and we have developed treatments.  

 I recall the jingle that accompanied the 1964 campaign that encouraged us to wear seatbelts. This encouragement by the government was termed “social normalizing.” The title of the jingle was “Buckle up for safety.”    

We are now all going to practice “social distancing.” The government is going to inject massive fiscal stimulus into the economy. The Fed has dropped interest rate to essentially zero and resumed quantitative easing. Our best medical and scientific minds are working around the clock to find a solution.        

That is what’s going on. Buckle up.

Here at Horseman Group, we strive to provide you with the highest possible level of customer service. Feel free to reach us at 314.692.7842 with any questions regarding your investments, risk management, or retirement.   

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Horseman Group – 3 CityPlace Drive - Suite 290 – St. Louis, MO 63141 – 314.692.7842 – www.horsemangroup.com  

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