Greetings Clients:

The markets continue to decline on coronavirus fears. The S&P 500 Index of large US company stocks is down about 11.7% over the last week, while our growth portfolio is down about 5.7%.

It is never pleasant to experience losses, but a market decline has not been unexpected. Chief Allocation Strategist Steve Bobo and I are unwaveringly confident in our process and the precautions that we have been taking for the last several years as we anticipated the next decline.

We have been researching this new coronavirus named COVID-19. The threat to global health and global economies is real, and in no way is it beyond the scope of our investment methodology. We are worried about the impact of the virus on human life, but we are not anxious about your money or ours.

The markets do not do well with uncertainty and they are currently pricing in a prolonged disruption to global trade.  It is impossible to predict if international precautions will end the epidemic soon. We could see a market bounce-back, or we could experience an economic downturn.  This is the same uncertainty that we live with every day, even when markets are going up.

If this virus is not the trigger that stops the longest market expansion in history, there will be something else.

As we discussed in our email last Thursday, time flattens volatility, and this is why it is so important that we understand when you need your money. Even if you are retiring tomorrow, you should not be planning to use up all of your savings in the next few years.  Your assets will be available for you when needed.

If you have immediate short-term cash needs, please let us know.

COVID-19 will be an economic non-issue sooner in the future than we can now imagine. 

Here are two excellent articles on the coronavirus and the salient points that helped fill in our understanding of the illness.

Bloomberg: The Coronavirus
https://apple.news/Arl-bzkzsSauWbRgcujcTjA

STAT: Understanding Pandemics

https://www.statnews.com/2020/02/12/understanding-pandemics-what-they-mean-coronavirus/

Summary:

80% of COVID-19 cases are mild. The severe cases tend to harm the elderly and infirm, but a number of those who have died from COVID-19 were young and healthy, including the Chinese doctor whose initial warnings were suppressed by the Chinese authorities. COVID-19 currently has a 2% death rate vs 9% for SARS. If severe symptoms (respiratory distress) emerge, they typically present at the end of the first week of illness. There are 4 known coronaviruses that circulate in people, and they mostly cause the common cold. SARS and MERS were caused by coronaviruses too. Influenza strains are not coronaviruses. A pandemic is the spread of a new disease over a large portion of the world.  The symptoms and severity of harm can be mild or severe. “Pandemic” only refers to the geographic scope, not severity of harm. H1N1 was the 2009 flu pandemic that was milder than expected and led to the World Health Organization’s loss of credibility. Like the National Weather Service predicting the severity of a storm, the WHO and CDC must balance how strenuously they warn of the danger of a new disease because if governments and communities spend liberally and the new disease does not cause great harm or is quickly contained, future warnings will not be heeded.

Please be assured that we will continue to monitor the situation, and we will take additional actions as necessary. Please contact us if you are feeling anxious about the market’s impact on your financial goals.

Sincerely,

John