An Update on COVID -19 and the US Response

Written by Chris Draughon

I want to see you achieve your financial goals so I spend my time making the complicated things simple. As the Director of Financial Planning I help our clients identify their most important financial goals and develop paths to get them there on time with room to spare.

March 16, 2020

I’m writing this personal message for our clients and our friends from an almost empty flight back to Florida from an almost empty airport in Washington DC. You’re welcome to share it if you find it helpful or comforting in providing some perspective and peace of mind.

What follows will contain no nuggets of wisdom regarding the viral outbreak itself. No advice to wash your hands or practice social distancing. You’ll find all that on your currently inflamed Facebook feed or cable news outlet.  This is nothing more than our observations of the current emotional environment, our reflection on similar circumstances we’ve all experienced in the past, and how to respond to it when it comes to the shepherding and stewardship of your financial resources.

These are worrisome times, indeed. Federal, state, and local governments are grappling to combat a threat that is both unknown and undefined in terms of its potential scope. It’s disrupting Spring Break plans for families. Vacations, cruises, and conferences are cancelled or postponed. Restaurants are closing. Hoarding of basic supplies is commonplace at local grocery stories. The general emotional consensus is dominated by nervousness and uncertainty. It should be abundantly clear to you from your social media sources (which are invariably unreliable) and the national news that the breadth, depth, and length of this event are currently unknown. As a result, we’re all living in a fishbowl of uncertainty. And it’s no fun.

Financial markets are reflecting this uncertainty. That’s their job, after all. They price investments based on a consensus view of their current and future prospects and values. The more uncertainty there is in the short term, the more markets fluctuate. When certainty returns, markets reflect it. And resist the temptation to suggest, “it’s different this time”.  It isn’t. The truth is, we never know what exact events cause recessions until after we’re in one. Whether this event leads to a mild recession or simply a temporary slowdown in economic activity is fundamentally unknowable at this point. Time will tell.

The actions to limit travel and social interaction are meant to “blunt the curve”, that is, limit the peak of the virus to a lower number of infections that won’t overwhelm our health care system.

While these may seem like draconian measures, you need only look to China and South Korea to see that they work. Both countries have seen their daily new caseloads fall. All of Mainland China reported only 12 new cases yesterday with a total population of 1.3 billion. By contrast, Iran, which hasn’t restricted travel within its borders, recorded 1,053 new cases yesterday. Iran’s population is 0.6% of China’s.

So, stay home. Work remotely. Limit your trips to buy toilet paper – even though we’re not sure why you’re buying so much of it. The sooner we can blunt the curve, the sooner life can return to normal. If you want to help all those people who work in restaurants, theme parks, airlines, and cruise ships get back to work quickly, follow the rules.

From a financial perspective, we have seen this movie before. Post 9-11, the Financial Crisis of 2008, and to a lesser degree the SARS, MERS, and H1N1 viral outbreaks all disrupted financial markets to different degrees. The recovery times are largely dependent on how quickly companies ramp back up and consumers begin consuming normally again. As the outbreak runs its course, we will have more insight and we’ll share it with you. Until then, remember this well: History is always the most painful when you are living through it. We will get through this. Until then, stay healthy and follow the recommended advice of your state and local officials. We will be back with an update as conditions evolve.

Our team will remain available during this time to take your calls, follow and communicate updates to you, and answer your questions. Don’t hesitate to call us if you need reassurance or just want to talk. In the meantime, stand fast. We will get through this. Faith in the future is far more powerful than any virus.

Your First Coast Wealth Advisors Team