As you know, we are in the midst of a pandemic as a new virus is spreading throughout the US and the world. Because it is a new virus, there are many unknowns and the uncertainty is causing an unprecedented response – closing schools, restricting travel, postponing large community events, quarantines, etc. The CDC has made clear that the number of reported cases will likely increase rapidly over the coming weeks, which is why the response has been so large. The bold response will hopefully minimize the spread and effects of the virus, but it is having a temporary but large economic impact which the markets are responding to.
Markets dislike uncertainty and often overreact in periods of stress. Because markets are forward looking, they have priced in expectations for a recession and a significant decline in earnings. Similarly, they will price in potential good news long before it shows up in economic numbers, making it very difficult to time exit and entry points in the short term. In contrast, for those with longer time horizons, current market conditions are creating more attractive entry points than we have seen in the recent past.
We are constantly monitoring and evaluating economic and market conditions. It is important in circumstances like these to avoid making investment decisions based on emotions. We have worked with you to construct a portfolio allocation appropriate for your circumstances. If you are concerned about how this pullback will affect your long-term financial plan, we are here to help.
We also want to assure you that Cambridge has contingency plans in place if we would need to self-quarantine. Over the past few years, we have upgraded our technology and we are able to access our systems and manage our client accounts from home if necessary.
Please don't hesitate to reach out to your advisor with any questions or concerns you might have.