Perspective Versus Panic

March 9, 2020 · Written By J. Stephen Lee

As financial markets continue to react in dramatic fashion to the evolving news around the novel coronavirus and COVID-19, we again offer some observations. Before doing so, we want you to know that JFS is fully prepared for any changing conditions. The health and safety of our employees is paramount, and we are ready to work flexibly and remotely as needed or as directed by authorities. We have well-conceived and tested plans in place to ensure all operations remain active and responsive in the face of any disruption, and are confident that we can, and will, continue to serve all of you in spite of any challenges.

Moving to some brief observations, we note that markets are still struggling to forecast the extent of the economic impact from the virus outbreak. Today oil prices have fallen following a rift between Russia and OPEC, and that added worry has led to another significant bout of equity selling. Last week saw global stocks gain slightly, but that fact seems lost at the moment. The U.S. Federal Reserve has implemented a 50-basis point (one-half of one percent) unscheduled rate cut to provide monetary (and moral) support, and the 10-year U.S. Treasury bond has dipped to its lowest yield ever.

But in a positive surprise, February’s jobs report far exceeded expectations — indicating that strong job creation trends continue in the U.S. Of course, March may well be a different story, but as we have previously noted, the fact is that the U.S. economy is on solid footing as these events unfold. So, while there will clearly be economic impacts felt abroad and in the U.S., it remains reasonable to expect them to be temporary, with economies returning to healthier conditions later this year.

We have stated emphatically over the past several weeks that market overreaction and indiscriminate selling is a mistake and can damage long-term portfolio performance. In fact, the opportunities created in such an environment can form the bedrock for future positive returns. Analysts and managers that we respect are invariably reminding of that fact as they note solid companies trading at fear-discounted prices. You may recall that Warren Buffett has famously said he “wants to be greedy when others are fearful.” In other words, stay the course.

So, in the midst of angst, we continue to see opportunity. Of course, we will take any and all necessary steps to ensure our employees are safe, and we will likewise always act prudently with your managed assets. But keeping one’s head in times of uncertainty, and indeed, when there are whiffs of panic in the air, is the proven way to succeed when others fail. Please reach out to us with any questions or concerns.