Black Swans, that’s what the latest burp in equity markets is called. That is, previously unseen events which are highly disruptive, with uncertain outcomes.
In a six day sell-off the Standards and Poor’s declined approximately 13% wiping out the gains for the year. Fear is as contagious as the Coronavirus which has now become the “la raison du moment” for a worldwide economic meltdown.
On the news channel this morning, the Surgeon General recommended that folks to not buy surgical masks saying, “They are NOT effective in preventing general public from catching the Coronavirus, but if health care providers can’t get them to care for sick patients, it puts them and our communities at risk.” His suggestion wash your hands often: Mine, get some hand sanitizer dispensers and spread them out at the office, home, schools…. Be kind, get your friends some.
What you should you expect – I do not know how long this virus will last, or how far this outbreak will spread, much less how many lives it will claim, before it is brought under control. However, I’m reasonably certain the world’s leading virologists and epidemiologists are working on it, and I believe now as then, that their efforts will ultimately succeed.
Let’s see, could history serve as a guide?
In January of 2003, a fishmonger, regarded as the first super-spreader checked-into a hospital in Guangshou China infecting the entire staff of the hospital thereby infecting nearby hospitals: That day the S&P 500 closed at $855.70. After the most recent decline, as I write this (3/2/2020), the value of the S&P is about $3007.00, roughly 3.5 times greater.
Back Swans come and go. The effort of the employees of the best companies in the world go-on every day; folks working on your behalf, and thus overtime the value of the enterprises for which they work have a strong tendency to become more valuable.
Our portfolios reflect a larger than average cash position.
Carlos Dominguez – CERTIFIED FINANCIAL PLANNER™, Portfolio Manager, RJFS
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