In early March the United States became subject to a pandemic known as COVID-19. This unprecedented pandemic, which first disrupted supply chains, has now created a global economic meltdown that has rippled through our economy.
What does it mean for investors?
The final impact of this virus is still unknown, but so far, we have seen some of the most volatile trading weeks since the Great Depression. In the first quarter of 2020, stock market selloff was the largest in history and closely mirrors historic bear markets in the 1987 stock market crash and the financial crisis of 2008.
But, there is good news for our Wealth Management clients.
As we were headed into 2020 our Wealth Management team felt the U.S. economy was in the late stage of the business cycle. Given the 11-year bull run and historically high valuations, we felt it to be prudent to move towards a late cycle defensive posture by realigning portfolios into larger mega-cap companies that are leaders in their respective industries with strong balance sheets that could weather market pullbacks. These companies include Amazon (+5.51%), Microsoft (-1.94%), Walmart (-5.05%), Johnson & Johnson (-12.28%), and Apple (-13.40%) to name a few.
As we look toward the future…
We think it is important to give perspective of similar past markets. The average decline in the four bear markets during the Vietnam War, Black Monday, Tech Bubble Burst, and the Financial Crisis of ’08 is -47.71% with an average duration of 18 months. In the bull markets of the four events listed above, the average percent increase is 334.55% with an average duration of 8.6 years at a 16.3% average annual return. Comparatively speaking the bull markets outperform by a wide margin and have longer durations with exceeding returns. In times of volatility it is always important to remember that long term goals require a long-term perspective, particularly during periods of heightened market volatility.
Have questions about your investments? We have team members waiting to assist you!
David Rea, Senior Investment Officer and Senior Vice President, (270) 831-1548
Marty Coursey, Trust & Investment Service Analyst, (270) 831-1541
Wealth management products are not insured by the FDIC or any federal government agency, provide no bank guarantee, are not a deposit and may lose value.