The Coronavirus and Templeton’s Four Dangerous Words

Volatility has remained heightened this week. Markets continue to swing on a daily basis as news is gathered on the spread of Coronavirus. Ultimately, no one knows how the pandemic will impact consumer behavior, supply chains, and the global economy. All current forecasts are simply speculation. We continue to encourage each of our clients to schedule a time to meet to review long-term financial plans.

As a reminder, for those clients who are in or nearing retirement, we generally have several years of expected distribution requirements allocated towards high quality fixed income. For those who in the accumulation phase, view this period as an opportunity to add to your equity positions via dollar-cost-averaging.

Below is this weekend’s recommended reading:

The Coronavirus and Templeton’s Four Dangerous Words (Fisher Investments)

Sir John Templeton once remarked that the four costliest words in investing were “This time it’s different.” While no one knows how the Coronavirus story ends, we do know that it will end at some point. History has rewarded those who have earmarked equities for long-term investment and ignored short-term noise.

Coronavirus: Our economists weigh in on the U.S., China and Europe (Capital Group)

Capital Group reviews the economic impact across markets due to the spread of Coronavirus. The view is the Coronavirus will cause global economic impact at least in the first half of 2020. Beyond that is anyone’s guess, although their base case is recovery in the second half of 2020.

From a valuation perspective, the S&P 500 now trades at ~17x earnings, which is in line with historical averages. Additionally, the dividend yield on the S&P 500 (2.10%) is 3x the interest rate on the 10-year Treasury bond, which is 0.70% as of writing. Equity valuations appear attractive to the long-term investor, especially relative to interest rates on fixed income.

How to Stay Sane in a Crazy Market (Newsweek)

The author provides some good context on the recent selloff. Simply put, volatility is a part of investing. One great insight: “6 of the 10 best days for stock prices over the past 20 years occurred within two weeks of the 10 worst days.” As the author explains, a good strategy in volatile times in the past has been to stick with your game plan, increase savings and continue to invest via dollar-cost-averaging.

As always, please share your thoughts on these articles or suggest any articles you think we should highlight in future posts.

For those who have not done so, this is a good time to revisit your long-term plan and stress test the portfolio under various market conditions. Please give us a call if you would like to set up a time to meet.

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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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