Always Have a Plan - April 17, 2020
April 17, 2020
Friends and Clients,
My thoughts and prayers are with everyone suffering from loss and/or loneliness during this past month.
We have all been impacted by this pandemic in some way, but most of us (including my own family) have not felt the stress like those working in the medical field and those families that have lost loved ones. Thank you especially to the people that put aside their own fears to help others that are sick.
What have we learned in the past month?
Last month I wrote about Adjusting Our Perception because events beyond our control were going to cause challenges and pain. Despite the suffering, we have used our time to reflect on what is most important in our lives, and we have cooperated and appreciated each other more than usual (families, friends and strangers).
Collectively we are working together to reduce the spread of infection, we are working on a cure for the virus, and we are making sacrifices of time and money on both an individual and governmental level to ease our fellow human’s burdens.
We can focus on the cynical side: It is not enough financial support, some people do not wear masks, or the support by government is unfairly distributed.
Or, we can focus on the fact that in aggregate, we are pulling together to help, and we will eventually move beyond this disease.
I continue to focus on the positives that will result from these challenging times, and now that some of the fear and emotion has subsided, there seems more of a sense that we will move forward. Financial markets are perhaps expressing this relief through the dramatic recovery in asset values during the past 4 weeks.
Things look a lot brighter, but there are also some concerns:
How can we really open the economy back up without being able to test? We do not want to spread this virus to those most vulnerable, but how do we move away from isolation unless we know we cannot spread the virus?
Because we have done a good job isolating, numbers of infections and deaths will start falling. That may mean we start opening up the economy, but without the ability to test, numbers could eventually rise again.
The bottom line is that there may be less fear and more balanced financial markets, but there is still a great degree of uncertainty. There are also many unintended consequences being spawned.
As I suggested, governments and central banks did find novel ways to offset economic loss, and they acted with a force way beyond my expectations. In fact, today Cleveland Fed President, Mester said, “Yes, we are moving into unprecedented territory, but remember we’re trying to lend to firms that through no fault of their own were impacted by the virus.”
I would argue that whether in your personal life, financial affairs, or business, you should always prepare for unforeseen and painful events. You don’t expect them to happen, but they inevitably have a way of happening anyway.
There is no point in passing judgement on the continuing moral hazard that is being created by the government and the FED. The focus should be on the message to risk takers in the economy: You do not have to plan for unforeseen risks; the FED and the government will be there to insure you against loss. In my opinion, that is exactly what the FED (and Mester today) is telling us.
This money printing is helpful currently, but I would suggest that it will lead to even more careless risk taking in the future. There may come a time when prices are rising, and the FED cannot print money to offset economic loss.
For now, everyone seems a little more relaxed, the virus will seem even less scary as numbers decline, and financial assets have recovered dramatically.
At August Wealth, we continue to remain positive on the economy and financial markets, but we will use volatility in the current climate to our advantage (averaging in and out of core investments). The S+P is up over 20% from it’s low in 1 month, and many other markets have moved in line with it.
Joseph Cardello, Principal
August Wealth Advisors
The Loft, 101 Franklin Street, Suite A
Westport, CT 06880
Direct (916) 461-9451 toll free (800) 985-9477
“Investment advice offered through Stratos Wealth Advisors, LLC, a registered investment advisor; DBA August Wealth Advisors.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. No reader should make any investment decision without first consulting his or her own personal financial advisor and conducting his or her own research and due diligence.”