Hi,
We wanted to share the below weekly email which we have been circulating to T&T clients in light of current events.
Why?
Because we know, although you might not be a client, you may have some anxieties regarding how this may impact your financial future and you might want to know that burning question
What Should I do?
This weekly briefing does not attempt to provide you with answers on how this effects your retirement, that comes when reviewing your specific plan, however, we are trying to make sense of an uncertain time and explaining how to invest in these volatile markets.
We hope this helps!
Dear Sir/Ma'am,
There have been some significant developments this week and I cannot believe that only 7 days has passed since we last wrote to you.
We are very much in the crisis stage right now and we do not see that ending any time soon. During this period, we plan on emailing you every week on Friday. However, do not wait until our email if you want to reach out to discuss any concerns. Managing your money is just part of our role. If you want to air personal anxieties, whether it's business, your investments and/or life in general, please do not hesitate to reach out to us.
Once again, I am not going to rehash the situation as we know it. There is no shortage of that information out there. It is changing almost by the hour and we don't feel we have anything useful to add, as we are not public health or infectious disease experts. We will likely look back on this and offer a retrospect, but these emails will be very much about our current thoughts and actions.
T&T USA will carry on as normal:
Business will continue as usual for us! We are set up to work remotely – our clients live across the US and UK, as indeed we do ourselves. We all have home offices, we are paperless, we meet each other and our clients via Zoom, all our books and records are stored with the top cloud-based Document Management System favoured by legal firms.
This is not going to impact our ability to work and advise you.
Eye of the Storm
Right now, we are firmly in the eye of the storm and, whilst this period could go on for a while yet (how long will be determined by our global collective and societal response), this is generally as bad as it gets in terms of fear and uncertainty.
Here are some things we believe:
- The long post-Global Financial Crisis bull market is over
- Recession is imminent – we're possibly already in one
- The stock market is a leading indicator – it will bounce back before the crisis abates
- This is scary but, human tragedy notwithstanding, things will be OK
Every single investment and/or retirement plan we put together took the following into account:
- That the bull run would end in the near future
- That the stock market would plummet in the near future
- That we would suffer a recession in the near future
We anticipated this; we planned for this; and we are ready for this.
Those clients who have been with us since 2015 have now endured nearly five years of us warning of the coming recession. But the eye of the storm is scary – you don't know when it is going to end, how bad it is going to get, or how much damage it will do – and every instinct screams at us to do something – anything!
And we will do something - we will keep our heads when others are losing theirs and we will maintain our larger perspective.
You can't time the market and we can't time the market. Heck, even Warren Buffet says he can't time the market (famously, his holding period is "forever").
But we don't need to.
In October 2007, BEFORE the world imploded, the S&P 500 topped out at 1,565. In February 2020, before the recent declines, the S&P 500 hit 3,386.
Including dividends reinvested, the cumulative total return from Oct 2007 to February 2020, assuming you were invested the whole time, was 172% (Source: https://dqydj.com/sp-500-return-calculator/)
But over those 12+ years, here are just some of the reasons investors were given (nay, screamed at) to sell out:
- 2007 - Global Financial Crisis (GFC) begins
- 2008 - Collapse of Lehman Brothers
- 2009 - Collapse of UK Banks
- 2010 - BP Oil Spill
- 2011 - Tsunami in Japan and London/UK Riots
- 2012 - Greek Debt Crisis
- 2013 - Boston Marathon Bombing
- 2014 - Fighting in Ukraine and Crimea (rise in Russian aggression). Crude Oil price collapse.
- 2015 - Chinese Stick Market Turbulence
- 2016 - Brexit Vote
- 2017 - Trump Presidency begins
- 2018 - Q4 Christmas Stock Market Correction
In every one of these very real "crises" investors panicked out, stayed out and missed out. And yet an unbroken investment in the S&P 500 starting at the very peak prior to the onset of the GFC, would have yielded a 172% return.
Losses are temporary, gains are permanent.
This is a dark time! But it is going to be OK, as long as we don't do anything to make it not OK.
Why we can't just go to cash now and wait to get back in
Because we don't know when it will end.
Furthermore, the stock market is a leading indicator. It falls before we go into a recession leaving us no opportunity to get out. It bounces back before the news is good, before investors flock back to the market and before the economy turns around.
Based on historical evidence, to get out now would be to crystallise a paper loss and miss the bounce back.
This outbreak is going to have very real economic repercussions. We are not disputing that, and our hearts go out to these who are and/or will be personally affected negatively on a micro level (job losses, business failures etc).
There is a very real human element to this outbreak and that obviously gives us great concern. Please take precautions and make efforts to stay safe. Until a vaccine is ready, the best we can do is reduce the number of infections and impede the spread (to reduce the strain on hospitals). History suggests the best course of action is both vigilant personal hygiene (hand washing etc) and major social isolation for a period of time starting now.
So, keep washing your hands, stop touching your face and, if you can, avoid your fellow humans (Zoom us instead).
Be well – we are with you on this ride!
João
-%Richard, Thomas & Martha
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