The Coronavirus has brought upon the global stock markets a nearly unprecedented selloff.  I don’t recall a more nervous time with continuing uncertainty as to how to deal with the pandemic in all my decades in the markets and I think many portfolio managers feel the same way.  Portfolio insurance in the form of index options have become prohibitively expensive and value stocks in such sectors as banking and cyclical industries have been particularly hard hit.

While I believe that at some point life and markets will return to normal, there is clearly a rush for the doors, and as I write stalwart companies such as Bank of America, Exxon Mobil and United Technologies are down 30-50% on the year and the vast majority of S&P 500 stocks, and the index as a whole are more than 20% below their February highs (bear market territory).  Headlines like Tom Hanks and his wife testing positive, the NBA suspending the season and the European travel ban announced by President Trump last night have a huge effect on psychology.  Clearly the scope of the health crisis and medical care limitations in Italy is on the minds of market participants and the fear and possibility that can happen here is real.

I wish I had the answers as to when the market bottom will arrive and how long this will affect the economy and corporate earnings, but I don’t.   I feel shallow in thinking in those terms when lives are at risk.  The health of friends, family and society at large is always foremost on my mind, but I’m neither a doctor or virologist.  I am trying to attend to what I can control, which is the health of my family and the management of my clients’ assets.  While the market downturn is beyond painful now, I have faith that our healthcare community will come up with a solution in time and we will be better prepared to act should this happen again.  I believe that the current health crisis won’t materially affect businesses 2-3 years down the road and markets will become more rational again.  The crash of 1987, the internet bubble at the turn of the century and the financial crisis of 2007-2008 were also times where a return to normalcy in markets seemed far in the distance, but it came and it will again.

I hope you all stay safe and healthy and please call or email if you have questions, concerns or insights.

Best regards,

Steve