March 16, 2020
The following is an update on the current market, focusing on the three main concerns:
The biggest concern is the fear of the unknown. As it turns out, we are getting some answers as China and Korea are improving. As bad as our situation is, we do see that there is an ending.
As long-term investors, market prices on a short-term day to day basis are somewhat irrelevant, although distressing. What really is important is how the portfolios will be priced a year from now.
What has happened is that the ten-year bull market has finally ended and it’s official that we have a bear market. A big difference between now and the 1918 (Spanish Flu market) is that then, the market was selling at 8x earnings, and now has been selling at 20x earnings. While there is always the hope for a V-shaped bottom that tends to be more likely when the market valuations are a lot cheaper, like our markets were back in 1982.
History shows that bear markets almost always tend to lead to recessions and by the time the recession is acknowledged, usually the market has started its recovery. The good news is that bear markets are swift, but the eventual recoveries are powerful. All of which plays into the long-term investors strategy of being a value investor and staying the course.
Actively monitor portfolios and adjust accordingly. Patience is a critical component of all portfolios.
This is a quick summary of the factors we are dealing with, if you have any questions, please don’t hesitate to reach out to us.
SteelPeak Wealth –
Institute of Portfolio Management & Economic Strategy
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