Capital Investment Advisors

How We As American Investors Will Get Through This Bear Market

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With the Coronavirus (COVID-19) making its way across the globe, it’s a nerve-wracking time. Now, more than ever is the time for us to summon three distinctly American traits – grit, perseverance, and resilience.

Around the US – and rest of the world – COVID-19 has people on extremely high alert. Schools are closing. Community programs, gyms, local businesses are shuttering. Disneyland is even closing – when, if ever, has that happened?

Americans are scared. We haven’t lived through anything like this before.

And, last week was a tremendously difficult time to be an investor. We’re navigating our way in a sea of red, wondering when the mountainous waves and choppy waters will calm. We experienced one of these swollen surfs this past week – it was one of the most dramatic declines the market has seen since 1987.

I want to share my thoughts on where we are and what I see as the path forward.

My team at Capital Investment Advisors (CIA) and I have stayed on the front line of the news surrounding COVID-19 and, of course, the market responses and repercussions. We’ve dubbed where we are today as the “Coronavirus Crash,” and every member of our team is committed to lessening its impact wherever and whenever we can.

We’ve been driven to understand how this virus could impact the economy, our investments, and, most importantly, the families we work with here at CIA.

Since we began to hear about this outbreak in China back in January, our research team at CIA has been diligently researching the economic impact COVID-19 could have for Americans. And on the health side, we’ve reached out to top contacts at the CDC and Johns Hopkins to understand better how the virus spreads.

We are as up to date on the current data as possible. But the reality is that up until now, there’s been a lack of reliable figures available. And, there are still challenges to getting accurate numbers. That’s because most of the people we have included in our statistics were already sick. We have very little data on those that have the virus and only get slightly sick or remain asymptomatic.

This type of skew pushes up the mortality rate and gets people scared. But I want to assuage your fears – as more data come to light, we’ll get a broader perspective on the reach and severity of COVID-19.

Coupled with the shortage of data is rapidly evolving, downright frightening information. Bring all of these factors together, and you see why America has had a rough start tackling this problem. We just didn’t (and still don’t, in some ways) know what we were dealing with.

While we may have tripped on the starting line, though, I firmly believe we’re vigorously working our way towards the finish line now. It might not be close, but we’re making strides. We are using our American grit, perseverance, and resilience to manage both the economic and social consequences of COVID-19.

Here are my top three steps that we, as American investors, can take to get through this challenging time:

1. Get Honest About the Situation

It’s time to face the reality of COVID-19 and how it will impact the broader population. The virus has made its way to America. Epidemiologists say that it’s been in the US since about November of last year – before the reported cases in China.

Many people and institutions, unfortunately, have been too slow to accept the severity of the situation. But this is quickly changing as we see more and more precautions taken across the board.

According to the data, even with our best efforts at combatting and keeping the virus at bay, we will still see between 20% to 50% of the American population contract COVID-19 this year.

Based on my conversations with health professionals, it’s likely that 99.5% or more of these patients, in our modern health care system, will win the battle against COVID-19. I put it this way because our narrative in the US should change to the survival rate, rather than the mortality rate. This reframe takes the panic out, while also focusing on the facts.

So, let’s all of us wash our hands, don’t touch our faces, and do a bit of social distancing. Remember that this is not an airborne disease, it’s a droplet-spread virus (meaning it spreads through an infected individual coughing or sneezing near an uninfected person).

Meanwhile, the world as we know it is going to look a bit different for the next few months while we all get through this together.

2. Take Solace in Your Bridge of Dry Powder

Here, I’m talking investments, and I mean the portion of your portfolio designed to hold up in challenging times (think bonds and cash). At some point, in the days and weeks, we’re going to be faced with having to stay home.

Think of everything that’s closed – schools, universities, the NBA, NHL, NFS, March Madness and the NCAA tournament. So, the economy will shut down for some time; we just don’t know how long.

With large pieces of the American economy closing, there will be an imminent hardship for many industries and their employees.

Your dry powder allows you to bridge that time; to get you through the difficult times when the stock market craters. To be clear, this doesn’t mean your portfolio won’t decrease in value. But, the bonds and/or the cash you hold will give you a financial bridge when the stock market falls out of favor.

I believe a fiscal response from Congress is imperative – to help our economy bridge the gap until we’re in safer territory, especially for those that don’t have dry powder to get them through.   

3. Trust in An American Recovery

Remember that this is America – we will get through this; it’s part of our history and in our country’s DNA.

Before we hit the good stuff, it’s worth running through the worst-case scenario. The absolute worst spread of COVID-19 has been reported to be around 20 – 40% of Americans. But remember, 99.5% will survive. And those that do will give us “herd immunity,” which is what happens when you give someone a vaccine and prevent them from transmitting the disease to other people.

What’s better is that we currently have the best medical minds in the world working on vaccines, and also treatments (think Tamiflu) for the virus. The first clinical trials are set to begin in the next four weeks.

Want to hear something even better? With the panic washing over markets, it appears investors are taking a near worst-case view. Why is that good? It’s good because if things turn out even slightly better than investor’s fear, the market will start to rebound.

Grit. Perseverance. Resilience. These characteristics are all primary in how our country handles adversity – and how we overcome it.

While much of the country is frenetically trying to come up with solutions (and rightly so), my advice is to take some comfort. We have the benefit of the American way. We will get through this. And when we do, markets will begin anew to reflect the real long-term earnings power of corporate America.

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