Your 401k is Like Your Face, Don’t Touch It

Good morning,

This outbreak is affecting our daily lives now.  We’re watching the super markets as much as the stock markets.  Many of you are making changes to adjust.  Trips are being cancelled, schools are out of session, many are working from home if they can. There’s no sugar-coating the fact that this is disruptive.  From an economic perspective, business has unexpectedly slowed down in many ways, changed dramatically in some, and sped up in others.  The phrase I heard last week was we are now looking at a “stay at home” economy.  It won’t be permanent, and we should keep that in mind with respect to the emotions, changes, and new balances in our accounts.  In a continued effort to connect your money to your lifestyle I wanted to give a few updates.

I am fortunate with the work I do and that I can work from home very efficiently.  My kids are home from school as well for the next two weeks and are with me this week waiting to receive their lessons virtually from their teachers.  I have no in person meetings scheduled over the next two weeks.  My visits with contacts from the investments you own are cancelled and we are setting up conference calls to meet.  I have met with several of you and want to be available to visit with you by either phone or a virtual meeting.  To make this easier please check my calendar to coordinate a visit.

Here’s the most notable news items as it relates to how markets and your money has reacted since the last update:

• On March 11, the World Health Organization declared COVID-19 a pandemic. 
• Last Friday, President Trump declared a national emergency to provide financial support for companies to offer more test kits
• Last night, the Federal Reserve announced an unprecedented measure to provide monetary stimulus to the economy by lowering interest rates as well as using its authority to purchase $700 billion of US Treasury securities and agency mortgage bonds. 

“Your 401k is like your face, don’t touch it”

I’ve never experienced living through a hurricane, however one of the last things I would want to do is attempt to sell my home in the middle of one.  Wait it out.  There is an enormous amount of uncertainty at the moment which is causing these wild swings both up and down and until we know more about the impact of coronavirus it’s best to stick to the plan we’ve set.  Fair market value is defined as a price that both a willing buyer and a willing seller would accept.  On the grand scale of things, there are not many confident buyers or sellers at the moment.  Selling or buying a large part of your portfolio in uncertain times is not a good plan. 

Finally, for those looking for more information and another firm’s view on this event, see the most recent update from Blackrock.  A quote from the report:

The evolution and global spread of the coronavirus outbreak are highly uncertain. What we know: Containment measures and social distancing mechanically bring economic activity to a halt, as seen in China and Italy. There is a strong incentive to enact such measures proactively to slow the growth of coronavirus infections, and France and Spain over the weekend joined Italy in imposing drastic lockdown measures. The impact on economic activity will likely be sharp – and deep. Yet we believe that the sharper the containment measures taken and the deeper the economic hit in the near-term, the more confident we should be about the rebound after such measures are lifted. We see the shock as akin to a large-scale natural disaster that severely disrupts activity for one or two quarters, but eventually results in a sharp economic recovery.