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Market Panics in Hindsight

The volatility experienced without reprieve since late February has continued this week. News has been constantly updated by media outlets, changing the perception on this pandemic and increasing the level of uncertainty in the markets. No one knows how long this potential event-driven recession and accompanied bear market will last. We remain committed to each of our clients’ long-term financial plans. We are fully operational, whether in our offices or working remotely, and we are available to have a virtual meeting at your convenience.

Below is this weekend’s recommended reading:

Market Panics in Hindsight (John Huber, Saber Capital Management)

We are experiencing one of the worst market panics on record. The S&P 500 entered a bear market quicker than any point in history, in more than half the time of the next quickest bear market. However, as hard as it is to believe, this panic won’t seem so bad as time goes on. As Huber states, “Investing isn’t easy, but it is simple.” Owning a broad basket of American companies and ignoring ups and downs has been a successful strategy over time.

As an example, consider the following great American companies and their declines since their respective peaks earlier this year,

  • McDonald’s (MCD) -44%

  • Starbucks (SBUX) -50%

  • General Dynamics (GD) -43%

  • Home Depot (HD) -44%

  • JP Morgan (JPM) -44%

We may or may not own one or more of these companies for our clients. This just gives you an example of the market hysteria. Have each of these companies’ intrinsic values, which is the value of each company’s future cash flows discounted back to today, really declined by 40% to 50% in the last 4 weeks?

What If You Buy Stocks Too Early During a Market Crash? (Ben Carlson, A Wealth of Common Sense)

This is a great article on market timing and the fear of buying when stocks are low, only to watch them continue to decline. No one knows when or at what level markets will rebound and begin the path to recovery. We do know that panic has always created opportunity. As a long-term investor, avoid focusing on an attempt to catch the exact bottom during a bear market. Instead, focus on patience and discipline, as those virtues have typically rewarded investors as time horizons are extended.

Viruses, Recessions, Imagination and “the End of the Beginning.” (Gavin Baker, Medium)

Gavin Baker was one of the early writers calling attention to the epidemic emerging in China and its threat to the rest of the world. As Baker states, “Just as the severe recession – and public health situation – we are living through was unimaginable only several weeks ago, America restarting at some point seems equally unimaginable but is inevitable. The world rarely ends. In fact, it hasn’t ended at any point to date. And it generally pays to bet the world will not end. We may not have yet seen the bottom of this bear market, but to quote Churchill again, we have at least seen ‘the end of the beginning’ of this bear market.”

As a reminder, we invested heavily over the past several years to set up our firm’s infrastructure for remote work, if necessary, by using the latest cloud-based technology. Despite a potential lockdown across the country, there will be no business interruption on our end, whether we are in the office or working from home. We have also partnered with some of the largest asset custodians in the world in order to ensure our clients’ accounts can be serviced without interruption.

We hope everyone has a happy and safe weekend. Please give us a call if you have any questions.


This newsletter contains general information that may not be suitable for everyone. The information contained herein should not be construed as personalized investment advice. Past performance is no guarantee of future results. There is no guarantee that the views and opinions expressed in this newsletter will come to pass. Investing in the stock market involves gains and losses and may not be suitable for all investors. Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security.

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