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First Quarter 2020

The first quarter of 2020 ended with a difficult month of March for investors. Since the February 19th peak, the S&P 500 Index has shed 34% to its most recent low (St. Louis Federal Reserve). That’s roughly in line with the average bear market pullback (LPL Research), with bear markets being defined by at least a 20% sell-off.

However, the rapid decline in the major stock market indexes has been unsettling. The 34% drop occurred in just over one month. It’s unprecedented.

But what we are seeing in the economy is without precedent, too. There is an enormous amount of uncertainty. Many industries that require person-to-person interactions are being shut down. And many of the service-related companies that remain open have seen a significant drop in traffic.

Since there is no modern precedent on which to model economic forecasts, the second-quarter projections for GDP have been incredibly wide. If we connect the dots, the economic uncertainty has translated into earnings uncertainty which in turn has translated into incredibly volatile markets.

A government-induced economic coma

While social distancing will slow the spread of COVID-19, the economic impact has been unparalleled. In a way, the government is putting key sectors of the economy in a coma, as it hopes to stem the spread of the virus. When health and safety dictate, the goal is to bring the ‘patient’ out of the coma.

However, policymakers are not expecting the economy to bounce back on its own. If shutdowns are encouraged or enforced, policy is being put into place to revive the patient when the time comes.

The government response to soften the expected economic blow has been extraordinary and goes well beyond what we saw during the 2008 financial crisis.

The Federal Reserve has not only dropped the fed funds rate to zero, but it has implemented several programs designed to support Treasury bonds, investment-grade corporate bonds, commercial paper (short-term IOUs issued by the largest corporations), money market funds, mortgage-backed securities and municipals.

Further, a new program designed to support small- and medium-sized businesses will be forthcoming.

During the financial crisis, the Fed’s focus was on Wall Street and critical credit markets. Today, the scope of support extends well beyond Wall Street and into Main Street.

Meanwhile, Congress has passed and the President has signed a $2 trillion stimulus bill.

In addition to mitigating some of the damage from surging layoffs, the Federal Reserve and the Federal government are trying to put a foundation in place that will support a robust economic recovery.

Will it work? Much depends on the duration and severity of the recession and the path of the virus.

Road to recovery

We see four steps that are important.

  1. A massive response by the Federal government and the Federal Reserve. I think we can check that box. While continued volatility is likely, a modest rebound from March’s low was fueled by the Fed and the $2 trillion stimulus plan. 

Other pieces of the recovery puzzle include:

  1. A peak in new U.S. cases and subsequent decline.
  2. An effective treatment and vaccine.
  3. Clarity on the economic data. What will be the steepness and duration of the recession? 

No one rings a bell that sounds the all-clear signal. Collectively, markets attempt to price in future events. Given the wide range of outcomes, volatility has been the rule.

But stocks will likely bottom before the economy rebounds.


We spend an enormous amount of time discussing and creating your personal financial plan.  A financial plan helps guide us through periods like this.  It helps us to stay focused on the long term, using a decision process that is analytical, logical and based on a simple premise for investing:   stocks rise more than they fall, and stocks rise more than they fall because historically, the U.S. economy has expanded over time.

We understand that what is happening is unprecedented. We are in the midst of an economic and health care crisis. Both breed fear and uncertainty. 

But we are confident this pandemic eventually will pass, and we are confident that the underlying fundamentals of the U.S. economy remain strong. Resilience and ingenuity are part of the DNA that make up America. We will persevere and we will recover.


Table 1: Key Index Returns




Dow Jones Industrial Average



NASDAQ Composite



S&P 500 Index



Russell 2000 Index



MSCI World ex-USA*



MSCI Emerging Markets*



Bloomberg Barclays US  AGG Bond



 Source: Wall Street Journal, MSCI.com, Morningstar, MarketWatch.   MTD: returns: Feb 28, 2020—Mar 31, 2020.  YTD returns: Dec 31, 2019—Mar 31, 2020. *in US dollars

One Other Note:

Social distance yourself from COVID-19 scams

Whenever there is a natural disaster, there are always people who prey on those who want to help. Today, the disaster is a pandemic. Many are fearful, many are scared. It makes us especially vulnerable.

The FTC has warned Americans to beware of the potential scams that are proliferating. Here are some precautions to take that will keep you safer:

  • Ignore texts and emails about cash from the government. Stimulus checks will be forthcoming, but, per the FTC, anyone who tells you they can get you the money now is a scammer.
  • Ignore online offers for vaccinations and unproven home test kits.
  • Please be leery of emails that claim to be from Centers for Disease Control and Prevention (CDC) or experts that claim they have information about the virus. For the most up-to-date information about coronavirus, visit the websites of the CDC or the World Health Organization (WHO).
  • On the same note, malware and phishing scams are on the uptick. Legitimate companies will never ask you to verify passwords or usernames via an email. Fraudsters will.

Here’s a warning from the Securities and Exchange Commission (SEC) that was updated on March 30:

       Fraudsters often use the latest news developments to lure investors into scams. We have become aware of a number of Internet promotions claiming that the products or services of publicly traded companies can prevent,        detect, or cure coronavirus, and that the stock of these companies will dramatically increase in value as a result. 

Please be careful. We are living in uncertain times. While we are confident this will pass, uncertainty breeds fear, and there are criminals all over the world ready to cash in on your fear.




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