It’s impossible to avoid the topic of Covid-19 this quarter, despite my contrarian nature’s push for me to ignore it in this space. I’ve also moved this section up in the newsletter; last quarter I talked about the relationship between human capital and your asset allocation, but hid it at the bottom. Please feel free to skip down to the article links below if you haven’t already.
As the Covid-19 pandemic spread across the world, the initial market panic was a bit different from past crises; everything went downhill together. Further, the volatility in the market – all those days with huge losses and huge gains mixed together – was essentially identical to the Great Depression. The numbers and data points trying to quantify the impact have boggled the mind, and will continue to do so. As others have done, I’ll quote Lenin: “There are decades where nothing happens; and there are weeks where decades happen.”
Through all of this, I remain optimistic even though the impacts of this pandemic have been massive – and will likely be more persistent than I initially supposed. Supply chains will be disrupted or broken. Personal liberty and the greater good will continue to wrestle. But a combination of human perserverence and science will eventually win out. After all, good news and bad news can coexist.
There’s been a bit of a recovery in the market recently; are we currently seeing a dead cat bounce, or have we already seen the bottom? I have no idea. No one does. Investing is pain; anyone who says differently is selling something.
But what do we actually do during this crazy time? Everyone gets to play their own version of March Madness: just survive and advance. Track your income and spending. Identify sources of liquidity (cash) in case you need it. Try not to sabatoge your long-term goals; stick to the investment plan you laid out before the pandemic broke out. For some perspective: the S&P 500 is down only 10% from a year ago. And it’s almost unchanged from January 9th of last year (yes, I cherry-picked that date). Remember: the stock market and the economy are two different, albeit related, things.
This is a time for personal finance basics. Keep things simple. But simple doesn’t necessarily mean easy.