March 23rd 2022 The 2 Year Anniversary Of The Bottom
I don’t know if you are aware but today marks the 2-year anniversary of the bottom of the Coronavirus Crash so I thought it an opportune time to reflect on what was happening in the country and in our homes.
By this point in time, I had gotten very used to my routine of working from my mother and stepfathers’ home which was a short 2-mile drive from my house. Fortunately for me (and the sanity of my family) mom and Steve were halfway through a three-year stint in Italy, so I had their house to myself. Carrie, my wife, was not so lucky. She had the task of working from home and also making sure our two boys were logging on everyday into their virtual schools and completing their assignments. Going to the grocery store was an adventure! You would wipe down before you left, put on your mask and gloves, and head off into the unknown. I remember vividly having to hunt down toilet paper, paper towels, and the very illusive sanitation wipes. Then when you returned home from the store, it was time to wipe down everything before it was allowed in the house (there was a point where I was required to change in the garage so as not to track in the virus thus exposing my whole household).
Although not clear at the time, the S&P 500 would bottom on March 23rd, 2020, at 2,191.86. Recording the fasted bear market in history at down 34% in 33 days. The government had purposefully shut down the economy and put it on life support. Panic and speculation were in full effect. There were daily briefings from multiple sources constantly and fear was in the air.
Around this time, I started reaching out to clients to take advantage of what I thought might be the 1 in 5-year Super Sale that historically happens. To be clear, I didn’t know if we were at the bottom or if we still had more room to fall. What I did know is that history was on my side and historically at a drop of 34% we were statistically squarely in the ballpark of the average bear market decline. I also believe that when you try to time the bottom or wait until it feels good to get back in you most likely will have missed the lions share of the recovery. I always want to be early, not late in these situations.
So, what was my call to action? Well, it was different depending on who I was talking with, as all my clients are unique, with different goals and at different stages in their lives but generally these are the topics I focused on.
- Dry Powder – I called anyone I thought may have some cash available to invest that they would not be needing for the next couple of years (again, I didn’t know if it would keep going down, so we needed time to let the strategy play out).
- Strategic Allocation Shift - For other client’s that didn’t have cash to put to work and with a longer time horizon, I suggested adjusting their allocations to be more weighted towards equities than bonds to participate more fully in the eventual recovery.
- Tax Loss Selling – It was a great opportunity to realize tax losses on paper for tax sensitive clients. I basically sold whatever had losses and then immediately invested the proceeds into similar investments. Not necessarily timing the market but taking advantage of an opportunity.
- Cashflow Needs - I suggested some clients use their access to margin (basically a line of credit attached to their investments) for their short-term cashflow needs so we didn’t have to sell investments while they were down and thus giving them the opportunity to rebound.
- Refinance Opportunities – I spoke with many clients about refinancing their mortgages into historically low rates which in many instances were under 3%, thus lowering monthly expenses.
As of close of business on March 22, 2022, the S&P 500 was at 4,493.10, a little more than 6% off of its January 2022 high but still 104% above the March 2020 low. Folks, we may never see the S&P 500 at 2,191.86 again (and with every passing month I have more conviction in that statement) but on average about every 5 years we will get a chance to take advantage of bargain basement pricing as long as we’re able to stay calm and optimistic. Just think about this, if the Coronavirus had hit the globe 20 years ago the outcome could have been far more catastrophic. No one would have been working from home with dial up internet. Think of how far technology has advanced. We’ve gone from beepers and flip phones to smart phones. Then think of the advancements in medicine. China published the gene sequence of the Coronavirus and in two days Moderna had the vaccine. Nothing short of amazing! I can’t wait to see what the next 20 years of advancements has in store for us, “Beam me up Scotty!”.
Rest assured that I will be hammering the phones (or whatever it is we use to communicate) the next time a great opportunity presents itself and until then I look forward to meeting and talking with each one of you and working on getting you to your most cherished goals. By the way, some of you reading this may have family members of friends who didn’t have as pleasant of an experience with the financial advice they were getting during the crisis. Please feel free to introduce them to me, it would be a pleasure and an honor to work with the ones you love.
This is being provided for informational purposes only, and should not be construed as a recommendation to buy or sell any specific securities. Past performance is no guarantee of future results, and all investing involves risk. Index returns shown are not reflective of actual performance nor reflect fees and expenses applicable to investing. One cannot invest directly in an index. DCH Wealth Management, nor any of its members are tax accountants or legal attorneys, and do not provide tax or legal advice. For tax or legal advice, you should consult your tax or legal professional. The views expressed are those of DCH Wealth Management and do not necessarily reflect the views of Mutual Advisors, LLC or any of its affiliates.