This week I am going to be sending you a few commentaries in order to calm the fears and to put a perspective on all that is happening. If you are fearful, I am not surprised. With all that we hear about coronavirus, we all fear for our lives. But the truth is that the vulnerable group is the elderly that have other conditions that can be aggravated if they get the disease.
That being said, you are probably more concerned about your money and if you will continue to get your income and be ok a year from now and beyond.
We are in a perfect storm that has been partially created by increasing fear surrounding COVID-19, the 2020 election and a Saudi-Russian oil price war. I’m sure that many people are panicking. But panicking at the wrong time costs people money. They panic and sell, which is why I am going to be sending you some explanations of where we are and past market downturns to put this all-in perspective.
Fear is natural, but what you do about it can determine where you will be years from now. The most difficult decisions are made with the facts and done so with a clear understanding of the consequences. So I ask all of you to lean on me. My team and I are working on this 7 days a week. At this point I would not do anything with any of your portfolios. I have positioned you for exactly what is happening.
First, I am going to communicate often about what is happening through commentaries. My next commentary will focus on secular markets so that you can understand the historical perspective of the markets during a downturn within a secular bull market. This will be helpful to put this all in perspective. It will give some context and reasoning to why I don’t move out of the market during downturns within a secular bull market. The next commentary will be how this is affecting the economy.
Second, most of you have a variable annuity that protects your principle with a fixed rate of return during downturns like this. In those annuities, there is a downturn protection that allows you to continue taking income without reducing your principle. Many of you have high yield bond funds for income. Those portfolios are 1 to 5-year maturity bonds and pay an interest on a monthly basis. I don’t see those portfolios being affected by this other than a small downturn in the value, which, if history is a judge, will bounce back after the fear subsides, but the income will continue throughout.
For those of you that have mutual funds or managed accounts, expect to see downturns in your portfolio, but the good news is that downturns with secular bull markets do not last long. Even if this puts us in a recession, which is possible, the markets will not be responding to the recession but what is after the recession, which will be a bounce up that will be hard to chase, so staying put is the best decision.
As a result of all I just mentioned, whatever we have invested in is secure long term and will continue to pay the income! A year from now, if my assessment is close to accurate, your portfolios should be back to what they were before the crisis. This was a necessary downturn to refresh the market for the next wave up. The economy was amazingly strong before the downturn, so even if we move into a recession, the move after it will be quick and strong.
Bottom line is that all is well for now! No need to panic, we are working hard to make sure that your goals are met, and your money is safe. I plan your investments so that if something like this happens, we are prepared, and your lives are not interrupted. We are here for you so please call if you need to talk or want to meet. Bless all of you, and as my mother always said, “This too will pass.”