March 18, 2020
To our clients and friends of August Wealth Advisors,
As we all reflect on our investment portfolios and try to navigate financial markets, I am receiving requests for my opinion on the current economic situation and how to invest in this climate. I am happy to share my thoughts, but I hope you will allow me to be slightly more philosophical in my approach to the topic.
Since the financial crisis in 2008, there is an incredible willingness to print money in order to offset economic pain. If governments and central banks come together to find ways to offset the economic losses that will result from lockdown and isolation, I would not underestimate this power. Like it or not, government is very likely to be a more interwoven part of our capitalist system going forward. We can argue whether this is appropriate as policy, but negative interest rates exist and have done so for many years in today’s world. We may perceive Japan and Europe’s lack of growth and price increases as the rational for predicting inability to stem this crisis, but I would caution against that argument.
I believe the most important questions to ask are: Do you believe we will continue to innovate in the USA and globally? Will our population continue to grow through immigration and reproduction? Will we hunker down and stay static for the next 10 years, or will we continue to adapt? Will governments allow economic pain to occur without taking far more aggressive actions than we have seen thus far? Is that action doomed to fail?
If you take the negative and cynical view in answering these questions, my essential recommendation is: Adjust Your Perception
Despite the terror of the coronavirus pandemic, and despite the painful adjustment process we face as an interdependent society, I believe it has strong potential to be a globally unifying event. During the last few decades, we have become increasingly reliant on each other’s economic supply chains for increased economic growth, millions have been lifted out of poverty, and we have become more tolerant in beliefs.
Despite increases in tolerance and respect for one another, our focus often centers on our differences, our injustices, and what we don’t have rather than what we do have. We sometimes focus on the fight instead of the progress we are trying to achieve. We can be cynical, and judge other’s behavior as selfish. But if we’re honest, aren’t we all being selfish in some way? We need to look after ourselves and our families to protect ourselves from threats that put us in peril. We take these actions to survive, and then we move forward.
Having experienced the loss of a child, many friends and colleagues are surprised at my positive outlook on life. But it really isn’t remarkable, it’s necessary. If you want to progress through challenging times, you realize how essential it is to accept your new reality, appreciate the gifts you have, and Adjust Your Perception. The process is not easy, it takes tremendous effort and cooperation, but relying on each other gets you through each day, you need a plan, and you need to execute, and when you look back over time you realize how much richer your life has become despite (and perhaps because of) the pain.
This pandemic is scary for us all, but it is also unifying for us. I would urge you to focus on that unification because I believe it will be far more powerful than our small sacrifices and small judgements of our differences. I believe I have experience to know that sometimes you need to feel pain and sacrifice to fully appreciate the gifts you have.
It struck me last night as we isolate ourselves, that this is a small sacrifice with unintended benefits. One of my clients texted me a photo of her children (home from college and away from social distractions) playing a board game together as a family. She was appreciative, as was I, with my own family, of being together and enjoying what we love about one another.
Our relationships with one another is the only part of our humanity that lasts. Deep down, even if some of us are not ready to see it, I am fully confident that each of us knows this truth. This pandemic will not be easy, it will cost us economic wealth, we will lose loved ones, but it will also sharpen our focus and motivations. It is a chance to re-new, to work together, to help ease each other’s burdens, and to move forward together.
I am an economist, but I cannot tell you how great the economic pain will be. I am a financial investor and speculator, but I cannot tell you where the bottom of the stock market will be. I am certainly not a doctor, and I have no idea when this pandemic will fade. However, I am human, and I know with certainty that this too shall pass.
I believe we will move forward collectively, as the world focuses on its similarities as opposed to its differences. My suggestion is to appreciate how powerful this unifying force is likely to be, multiplied by the expectation of actions of leaders to offset the pain. I suspect governments will act with abandon in ways we do not yet know. These actions will reduce fear over the next year. Ultimately those actions will produce a new set of implications and consequences down the road.
How do I suggest you invest?
Determine your time frame, and if it is long term, start to deploy some capital.
Understand your goals, and prepare a plan of action to guide you that doesn’t deviate with every emotion you have. It will help you navigate the unexpected events that will occur in the coming year and beyond.
Buy a diverse group of companies and assets in countries with stable legal systems that allow for dynamism and adaptability. We are all in this together; we will sink or swim together.
Assets that historically protected you in declining markets may not protect you in the future, so reduce investments that offer little or no yield. The fear of losing your wealth may result in losing what you desperately try to hold onto.
Appreciate that volatility that will occur; use it to your advantage by averaging in and out of investments. Stay liquid enough to adjust your portfolio and fulfill your cash requirements.
There is no doubt we are headed down an arduous and uncertain road. However, there will also be inevitable opportunities created as a result of the coming political, fiscal, and monetary actions. Taking the time for quiet reflection and robust planning are essential.
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.”