Summary | First Quarter 2020
“Things turn out best for people who make the best of the way things turn out”
This quote from one of college basketball’s iconic coaching figures, the late John Wooden, seems appropriate not simply because this is the time of year that college basketball and March Madness is normally wrapping up, but because of the challenges and choices that investors currently face.
During periods of market weakness, investors typically cycle through a wide range of emotions. Initial feelings of anxiety give way to fear and panic when weakness persists or worsens. In the event of extreme weakness, like this past quarter, those feelings are eventually replaced by capitulation, despondency or even depression. The cycle of emotions may have a fairly typical progression, but every investor goes through it at their own pace which makes it impossible to gauge the overall mindset of the entire population of investors (or the marketplace) at any point in time. With that said, the speed and magnitude of the recent market selloff, combined with the health concerns we are all dealing with, likely means that investors this time have moved through the cycle at an accelerated clip.
Advisors are Human, Too
As advisors we certainly aren’t immune to the emotions of investing, but through experience and education, we are perhaps more aware of how emotions can impact actions. In our recent note, we urged investors to not obsess over their losses and focus instead on the opportunities. Obsessing over losses or portfolio value compared to a previous high only promotes more negative feelings. Absent the advice of an experienced advisor, that negativity typically results in inaction or worse, selling out of the market after the worst of the downturn has potentially already occurred. In order to focus on opportunities, investors must make a conscious effort to put aside the path their portfolio has taken to get to its present state or value. Instead, they must focus on treating today as if it were the first day in the life of the portfolio. As investors, none of us can control how the market or things with the coronavirus have “turned out”, but we can each still make the best of it.
It may be hard to envision now, but there will be an end to this crisis. Humans (and markets) have proven through prior crises, be it hurricanes, earthquakes, wars, and even other pandemics, to be incredibly determined, resilient, and innovative. We see no reason to think that this time will be the exception.
Contact Brad Swinsburg 404-874-6244 if you have questions on the market’s 2020 outlook.
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Unless stated otherwise, any estimates or projections (including performance and risk) given in this presentation are intended to be forward-looking statements. Such estimates are subject to actual known and unknown risks, uncertainties, and other factors that could cause actual results to differ materially from those projected. The securities described within this presentation do not represent all of the securities purchased, sold or recommended for client accounts. The reader should not assume that an investment in such securities was or will be profitable. Past performance does not indicate future results.