Have you checked your retirement or brokerage account recently?
I haven’t. I can’t bear to look. Besides, what’s the point if all I am going to do is hold tight? As I’ve done every time the market has gone code red since the 1987 crash.
Stocks always came back from the brink, but it’s harder to hunker down this time, and not just because I am closer to retirement and have less time to make up the losses. So much is going so wrong at the same time. The coronavirus continues to spread. The financial system is straining to keep up with massive dislocations of capital. And the economy is being put into suspended animation, a last-ditch effort that may throw millions of Americans out of work.
But I’ll never convert the retirement fund into cash. I am like those poor souls who went down with Titanic: unable to dive into the dark, cold waters of the North Atlantic as long as there is a chance, no matter how slim, to survive on board.
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I spoke to a local financial adviser who has worked through every market panic in the past six decades, starting with JFK’s assassination in November 1963.
“In every case, each one is different but the human reaction is the same: fear and greed,” the adviser said, asking that his name not be used because of compliance rules at his firm. “In every case you should have been a buyer not a seller.”
The data, of course, back him up. From November 1963 through March 16, 2020, the Standard & Poor’s 500 index returned an average of more than 6 percent — more than 9 percent with reinvested dividends, according to an online calculator from DQYDJ, a financial information company. That includes seven bear markets (peak-to-trough decline of at least 20 percent) with an average sell-off of 39 percent.
As of Thursday’s close, the S&P 500 has dropped 29 percent since its Feb. 19 record high, which is a little more than half the decline from 2007 to 2009.
“When you get a situation where everything is destroyed, for me it’s like being a kid in the candy store,” the adviser said.
He suggests looking for strong dividend-paying companies — those not tied directly to the ups and down of the economy and that have the resources to hold on during a recession. He didn’t want to rattle off a list (the compliance cops again), but did say companies that sell basic necessities like food and health care and drug companies were the kinds of stocks he’d recommend.
“There are lifetime opportunities, if you dare,” he said.
* * *
When will the market hit bottom? When do the pros say "This is overdone, it’s time to buy”?
“Investors are looking for evidence that containment measures are helping the slow of the spread of the virus,” said Dan Kern, chief investment officer at TFC Financial Management in Boston. “China and South Korea have slowed it.”
Unfortunately, the United States isn’t there yet; in fact, all signs suggest it’s going to get worse before it gets better.
“Investors are also looking for a fiscal policy response,” Kern said, referring to federal economic aid that will help laid-off workers and small and midsize businesses hang on as the economy slams into a wall.
“The Fed is going a great job. But it can only do so much," he said.
The Federal Reserve has cut interest rates to near zero, set aside at least $700 billion to buy Treasury securities and mortgage bonds, and initiated programs to support crucial funding markets such corporate IOUs, known as commercial paper, and money market mutual funds.
“We need a convincing response from Washington,” Kern said, "and that will help form a bottom.”
Congress and the White House have approved an $8.3 billion spending measure to combat the coronavirus, as well as a package, estimated at several hundred billion dollars, to bolster unemployment benefits, food assistance, health services, and free virus testing.
On Wednesday, President Trump proposed spending $1 trillion, split roughly between consumers and businesses, to help stabilize the economy.
After falling 5 percent on Wednesday, the S&P 500 ticked up almost 0.5 percent on Thursday.
Wednesday’s trading was described as panicked, with investors selling everything, including super-safe Treasuries, and moving into cash.
Treasury Secretary Steven Mnuchin was asked whether the stock market should be temporarily shut down.
“Everybody wants to keep it open,” Mnuchin told reporters. “We may get to a point where we shorten the hours if that’s something they need to do."
Kern, the TFC investment chief, agrees. “Closing the market will only amplify the panic,” he said.
But a shorter trading day might be a good idea.
With much of Wall Street working remotely, “It’s putting a lot of stress on trading systems and the people who are all working from home,” Kern said. “And it raises the possibility of something going wrong.”
Enough has gone wrong already.
But we’ve got a ways to go before hitting bottom.
Whether you jump or not, hold on tight to that life preserver.