We are witnessing extraordinary moves in the financial markets so far in March.
The coronavirus fears continue to worry investors but there is more to this…we now have government stimulus in response to coronavirus fears, which is believed to be causing economic fears.
The proposed government stimulus and government actions for containing the virus are synergistically amplifying market fears. Not only are we seeing public fear of catching the virus, but we also see the market fearing a recession and increases in government debt.
People are staying home to follow government recommendations to contain the virus. This is good advice for our health. However, the impact is that money is not being spent and people aren’t traveling, which is hurting business.
Regardless of why it begins, the formula is the same. Anytime business is disrupted, markets will decline and recessions will follow.
Now the government is trying to figure out how to prop business up and help those who have to stay home from work and who are not receiving a paycheck. The hope is by offering stimulus to people, they will spend money, which in turn will help business.
This stimulus is obtained by borrowing money from the Fed, which adds to the nation’s debt and ultimately, rests on taxpayers to repay. This is repaid by increases in taxes. This is the new economic fear and is believed to be accelerating the market selloff.
This is like a falling knife and no one knows how long this will last and how this all comes together.
My opinion based on past experiences is that people and the markets tend to overshoot and overreact to information. That doesn’t mean there is nothing to be concerned about, but the overreaction scares people into behavior that will likely have undesirable results.
This includes our government. This includes traders on Wall Street. This includes you and me.
In times like this, it is hard to know what the “right” course of action is to take. Some would say get out of the market. Others say to let things work themselves out and remain invested.
History would tell us that the latter is the best option. It’s better to remain invested and stay focused on the long-term, understanding that there will be times like these to contend with.
I posted a blog on Tuesday discussing this further that you can access here.
The last couple of weeks have reminded me of a couple of quotes by Earl Nightingale about fear and worry:
“Whenever we’re afraid, it’s because we don’t know enough. If we understood enough, we would never be afraid.”
“Don’t worry. Worry brings fear, and fear is crippling. The only thing that could cause worry during this test is trying to do it all yourself. Know that all you have to do is to hold your goal before you. Everything else will take care of itself.”
As always, whatever questions you have and decision you’re considering, we are here to support you.