2020 Bear Market: Coronavirus and Oil Price Wars
“Be greedy when others are fearful” – Warren Buffet
The primary function of financial journalism seems to be terrifying us out of ever achieving our financial goals by investing in equities. We have been reminded hourly of this great truth since the S&P 500 officially entered “bear market territory” by closing 26.75% below its previous all-time high.
The equity market has done this, by my count, about one year in five since the end of WWII, giving rise to the statement I made to you when we began working together: that if you couldn’t ride out an average 30% decline about that often, you simply could not be an equity investor.
Every bear market has its unique precipitating causes. This one’s seems to be caused by a heavy serving of uncertainty surrounding the coronavirus with a side dish of oil price wars between Russia and Saudi Arabia.
Neither I nor anyone else can predict when, where or how this bear market will bottom out. We can only observe the historical fact that sooner or later, they all have. As long-term, goal-focused investors, we are given a choice: to be guided by the totality of the historical record, or by today’s catastrophist headlines. I choose history. I assert my belief that “this time” is not, in fact, different.
Capitulation to a bear market has most often turned out to be a tragedy, from which many investors’ financial (and especially retirement) plans never recover. The tragedy is sharpened even further by its timing. If one sells when the market has declined 26.75% (as of market close on 3/12/20), the remaining average decline has only been another 4% or so, measuring from the top. That is: on historical averages, to give up now is to find later that one was closer to the bottom than to the previous peak.
My mission continues: not to insulate you from short – to intermediate-term volatility, but to minimize your long-term regret. The best way I know to do that is by encouraging you to stay the course.
Stay the course. As always, I’m here to help.
David R Henderson
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