What Will Be Our New Normal?

Spoiler alert: I don’t know. Spoiler alert number two: neither does anyone else. I get a kick out of prognostications anticipating all this activity from home – working, teaching, learning, exercising – will catch on. As if, after several months of 4 Zoom meetings a day with 3 of them occurring in the middle of a light sabre battle between your offspring, people will want…MORE of this! I don’t know about you, but this extrovert’s family is about three days away from applying for me to be a bagger at Kroger just so I can talk with people for a few hours. (What’s more, before this pandemic party, I didn’t even realize I am an extrovert!)

I received an email last week from a long-time financial planning professional who believes the Covid-19 pandemic will cause permanent changes in our lives and our collective psyches. Think Great Depression that left an entire generation who felt compelled to live frugally the rest of their days. Furthermore, he ponders whether these changes will affect how business is conducted around the world. Will countries start sourcing critical supplies such as pharmaceuticals and other bio-medical supplies from companies based domestically or, at least, from allied countries? Will companies overcome their reluctance to employees working from home and, if so, how will that affect the commercial real estate and transportation sectors of our economy? Will education, particularly post-secondary, services be delivered on-line more now? Even if an effective treatment and vaccine are developed for the coronavirus, will companies and people still be reluctant to travel abroad for fear of contracting another virus?

As an investor, these thoughts can be dizzying. When it became obvious the country was shutting down except for essential services, the S&P 500 fell more than 35% from its high on February 19 to its new low on March 23. The crash was the fastest from Bull to Bear territory in history! Faster even than the stock market crash of 1929. Furthermore, while the market has risen about 25% since that low, it is still quite volatile. In fact, over a 28-day period it closed either +.5% or -.5% every single day – the most consecutive days of that amount of daily movement since 1931. That means the stock market is still stressed and investors are uncertain about the future.

So, what is an investor to do?

When I used to work for Dr. Lee Todd at the University of Kentucky, during stressful situations he used to tell us, “When in doubt, work the plan.” In other words, focus on controlling only what we can, ignore the rest and take comfort you have a well-thought-out strategy. For an investor, that means following one’s investment strategy – all Moneywatch Advisors clients have one – and ignoring the daily gyrations of the stock and bond markets. (I’ll describe an investment strategy and how to stick to it in more detail next week)

So, pandemic or not, be nice to people, eat well, get some exercise and spend less than you make. Because, as Winston Churchill once said, “The future is unknowable, but the past should give us hope.”

Steve Byars, CFP®