We are all now living through a period in history none of us will ever forget. The impact on our families, communities, and country has been profound. And it continues. There remains great uncertainty, worry, and fear about the coronavirus and its impact: how widely it will spread, how fatal it may be, and how long it will last. When will we see signs of stabilization in its spread and a decline in daily new cases? When will we “flatten the curve”?

We’ve frequently said both recessions and bear markets are inevitable phases within recurring economic and financial market cycles. Investors need to be prepared for them to happen, but their precise timing is consistently unpredictable. There is always the risk of an unexpected “external shock” to the markets and economy (e.g., a geopolitical conflict or natural disaster).

It’s one thing to say it and another to actually live it. And still, another when the precipitating event or catalyst for the recessionary bear market is something none of us have experienced before: a global pandemic, which has instigated an extreme societal response—including the indefinite closure of schools and non-essential businesses, shelter-at-home orders, quarantines, lockdowns, and social distancing—and has potentially overwhelmed medical facilities, personnel, and supplies.

We will get through this crisis period. Things will improve and recover. This too shall pass.  We will be with you to navigate and provide perspective as we all experience what I believe will become known as the COVID-19 Era.
 
As you read this month’s newsletter, we hope you and your family are safe and healthy.

Market Commentary- First Quarter 2020 

The first quarter of 2020 has been an unprecedented period in U.S. financial market history across numerous dimensions:

-  The U.S. stock market fell into a 20% bear market in the shortest time ever—just 22 days—and continued further, dropping 30% in a record 30 days. The typical historical bear market peak-to-trough decline has taken around 12 to 18 months.

-  Short-term expectations of stock market volatility, as measured by the VIX index—often referred to as the market’s “fear index”—closed at an all-time high in its 30-year history on March 16. And the market’s actual realized volatility has only been higher in October 1987 (Black Monday) and the late 1920s.

-  The 10-year and 30-year Treasury bond yields fell to all-time lows of 0.54% and 0.99%, respectively, on March 9.

-  Oil prices had their biggest one-day drop since the 1991 Gulf War, plunging 25% on March 9, triggered by a price war between Saudi Arabia and Russia.

Year to date, larger-cap U.S. stocks have fallen 30%. Growth stocks have continued to hugely outperform Value: the Russell 1000 Growth Index has fallen 25%, while the Russell 1000 Value Index has fallen 35%. Smaller-cap U.S. stocks have done even worse, falling 38%.

Developed international stocks have fallen 34%, and emerging-market stocks have dropped 31%. Much of the differential between U.S. and foreign stock market returns has been due to the appreciation of the U.S. dollar, which has risen roughly 4.5% year to date.

In the fixed-income markets, core bonds have gained 1.1%, once again providing their key role as portfolio ballast against sharp, shorter-term stock market declines. As noted above, Treasury bond yields have fallen sharply. They have been extremely volatile as well—shooting up on some days when stocks were also sharply selling off. The 10-year yield is currently at 0.76%, down from 1.92% at year-end.

To read the full Q1 commentary, please click here. 

This Is Life: The Three C’s: COVID-19, Common Sense, and Courtesy

None of us have experienced or seen or even imagined an environment like the one we find ourselves living today. It’s surreal! Who would have thought a face mask would become a basic part of our wardrobe…BUT here we are in this new world of COVID – 19.

My middle son, Elliot, went online and found instructions on how to make a mask from a 2’ by 2’ piece of t-shirt material and two rubber bands. He made me one, then one for each of his two brothers and finally himself. Eight rubber bands and a couple of black t-shirts later, and we all had “protection”. I was moved by Elliot’s practicality, but also his act of kindness. A simple story like this personal experience confirms to me that these times will pass. More importantly, we will all be better off as people and families as we come together and deal with COVID-19.

I have spoken with many clients and friends and simply listened. What has been amazing is everyone’s collective attitude towards dealing with this strange new world. Gratefully, there is a lot of common sense out there. People are not panicked, but concerned. Everyone I have spoken with is exercising some level of objectivity and practicality; keeping their hands sanitized, staying isolated as much as possible, staying 6 feet apart, and contributing in their own way towards preventing and eventually defeating CORONA. I know it sounds corny, but our actions reflect a basic attitude in this country of always coming together to face a major challenge.

Here are some small gestures/stories I have the privilege of hearing by simply listening. One client handed a $20 bill to a homeless person at a freeway exit; the first time she had ever handed a bill from her car to anyone. Another client and friend have increased his tip on “take out” orders to 25% to help the servers we all take for granted. One of my partners sits at home with his two daughters and wife delivering on his promise to keep his family safe, but also working to make sure our clients are taken care of during these challenging times.  My other partner works from the office providing the necessary support to keep things moving forward. A single mom I know drove 7 hours and is staying with her sister to give support as the sister starts a new business: yes! ….. starting a business in these times. A group of women who are in an investment club had a ZOOM meeting for the first time to deliberate over their stock investments;  3 hours later decisions had been made, voted upon, and executed.

The courtesy people are paying to each other during these times is quite amazing. I believe we are all becoming better people, more appreciative of our freedoms, and smiling at strangers more frequently. Granted, most smiles are covered by a mask, but it is amazing how much people say with their eyes.

At GFP, it is business as usual. We are fortunate to have the technology and mobility to work in a safe place and to support your needs. We greatly appreciate your trust in our firm, and we moved by all the examples of the 3 C’s we have been the beneficiaries of observing.

We will get through this together, and all be better people as a consequence.

We are Here for You

We understand uncertain times may produce stress and anxiety. Sometimes having someone to listen and be a sounding board for thoughtful conversation can help during difficult times. Please know whatever your needs, we are here for you. Our process is centered around listening, and educating you so you can feel confident in your future. Please contact us if you would like to schedule a meeting or call.

If you would like to schedule a time to discuss your needs, please click below and pick a time on our calendar here.