Bungled Trump Announcement Drops Stocks into Bear Market; All Market Gains Erased Since January 2019
Wow! It's not often that a single announcement can knock a year's return off the stock market in one day, but Trump's address last night accomplished just that. Trump stated that all air travel from Europe (except the UK) would be suspended, along with trade in goods, for 30 days starting Friday night.
Within minutes, the Department of Homeland Security was obliged to explain that the ban on air travel applied only to non-US citizens and that trade was NOT suspended. However, the damage to confidence was done.
As European leaders and investors were equally blindsided, US stock market futures went into an immediate tailspin. At the open US stocks open limit down 7%, and closed the day down 9.5%. In a typical year, stocks rise about 8%. At the close, the S&P 500 was at the level last seen on January 2nd, 2019, which means that all of last year's steller returns are now erased.
That's the bad news. The good news is that the market is temporarily, not permanently, impaired, will recover eventually to the record levels we saw just this past February 19th and will make new records in the future. None of our clients' financial plans have been derailed by this bear market, the first in 11 years following the longest bull market ever.
We have been aggressively buying stocks since Monday, March 2nd, and thought we saw the selling climax on Monday, March 9th. We are still buying as of today. Some of our clients are putting more money into their accounts.
If that seems like madness, remember that our job is to buy low. If the stock market is willing to sell us good companies at a 25-30% discount from 4 weeks ago, we WILL take that offer.
We are also fielding many, many calls of concern from clients - by all means, keep those calls coming!
Here in NYC, we are keeping to normal as much as practical. Our office is ALWAYS stocked with face masks, goggles, flashlights, whistles and a first aid kit in preparation for any number of catastrophes. We are entirely prepared to work remotely, as we did after Hurricane Sandy, 9/11, and numerous blizzards and hurricanes.
We briefly considered closing our office, but for the time being see no need. We hosted a client event this past Wednesday - turnout was reduced by 60%, but a good time was had by those who attended.
As of now, the remainder of the NBA and NHL seasons are cancelled, opening day of MLB is postponed by two weeks, March Madness is cancelled, the St. Patrick's Day parade is cancelled in NYC, gatherings of 500 people or more are cancelled in New York State, which means Broadway theatres and Lincoln Center are closed. Major museums like the Metropolitan Museum of New York are also closing for a few days.
As scary and insane as this may seem, this is exactly how things were after the 9/11 attacks - for about a month. By then, people had recovered from the initial shock, evaluated the situation and moved on.
Here is one simple way to keep yourself safe - wash your hands with soap for 20 full seconds several times a day.
Why is hand washing so important? A free range virus is like a jelly bean with a protective outer shell made up of an oily protein surrounding a gooey interior of genetic material. The outer shell is readily dissolved by soap (also alcohol and heat.) Without the shell, the genetic material inside quickly breaks down and can't threaten you.
By all means, keep up with information from reliable sources like the CDC, keep washing your hands, and try to live your life normally!