Weekend Edition – Markets’ Response to Crisis

As we all “shelter in place” and our kids are in “cyber school” we take in news both of the day and of the bigger picture. Here are several personal financial-related cautionary thoughts and a quick graphic (see below). People way smarter than I say that data is key to decision-making and the ability to stick with a plan in crisis situations.

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Cautionary thoughts:

Recession (of unknown severity and length) is likely on the imminent horizon. Recessions negatively affect stock prices, jobs, income (raises and bonuses are reduced or postponed) and business growth – especially small business growth. Recessions can last three months or 1-2 years if history is a guide.

Inflation is a longer-term risk (later in this or in future generations) due to accumulated Federal Reserve and government stimulus. While government stimulus is necessary to boost an economy and its people out of recession, stimulus on top of (2008- present) stimulus contributes to a negative cycle. More to come.

Cash savings, “emergency funds”, “rainy day funds” and various forms of income (job, investments, insurance) can serve as a buffer of sorts to get through tough economic times. It has never been a more important time to control spending and reduce or eliminate debt (save, say, a primary home mortgage). Please ask me about these concepts.

Patience, discipline and long-term strategy are key, as the data below suggest.

Thank you for reading, stay safe and keep in touch!

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