We need a break from the elephant in the room, as we are sure that you can easily find 24/7 media coverage about COVID-19. The free flow of information is a good thing, but invariably the truth and falsehoods get blended into confusion, and other relevant and more positive topics get drowned out. Here are a few observations that your team at Smith Bruer Advisors is seeing.
- Technology in action. If the current crisis had happened even ten years ago, the negative impact on companies and the economy at-large would be more significant. Smith Bruer Advisors is a prime example. Because of our investment in various technologies we are successfully operating in a decentralized fashion and will continue to for as long as it is necessary. Technology will allow us to serve you and your needs during any number of scenarios. In other areas, 3D printers are making medical parts, productive meetings are happening over video conferencing, and medical advice is available via telemedicine. These activities, among many more, are crucial to keeping parts of the economy operational and they are foundational to an eventual recovery. They are integral in addressing other events we will face in the future.
- The markets are working. Nobody likes to see the market drop, but what volatility tells us is that the market trading mechanism, such as the New York Stock Exchange, is alive and well. It means if anybody needs access to their stocks or bonds, then the market is ready to facilitate that trade. That is what the industry terms as “liquidity”, and we tend to under-appreciate its value when circumstances are calm and positive. We have also witnessed the use of the circuit breaker system, which is where an exchange temporarily halts trading so that market participants can catch their collective breath and process new information. In other words, it helps curb knee-jerk trading decisions. Maintaining liquidity and monitoring trading activity are all a part of an orderly and efficient market, although at times it may seem chaotic. That said, these parameters are part of why the United States has the best financial system in the world.
- Discipline in execution. There is a principle that talks about the difference between a soldier being good on the range versus one that is good under fire. This truth is part of why we work with Dimensional Fund Advisors (DFA). Volatile markets are nothing new to them, and despite the wild ride, DFA continues to execute their time-tested trading and research disciplines which ultimately benefit you. As your advisors, we are here to help you stay engaged with your plan. Built into your plan is the preparation for times like these through broad diversification across high-quality companies, sectors, and geographies, coupled with an appropriate mix of equities, bonds, and cash. In the middle of a storm is not the time to determine if you’ve built a sturdy house. Be confident that you have a good foundation and quality materials (investments) in your financial plan.
- Demand is not dead. Approximately seventy percent of our economy is driven by consumer demand, and even though some things may be on hold, you can see that demand is strong. Yes, the desire for toilet paper is a great example. Grocery stores and wholesale clubs are as busy as ever, drive-thrus have long lines, medical facilities still have patients, restaurants are delivering take-out, pharmacies are filling prescriptions, and construction continues. Parts of the economy are still fully operational, and once we get through these circumstances, the pent-up demand will be met, and recovery will begin. We all know that there are challenges and that a recovery will take time. History proves that. Our encouragement to you is to be receptive to the good things that are happening right now and choose not to be bombarded by the endless cacophony of doomsday prognosticators. They don’t know you, and they don’t know your needs.