Putting corrections in perspective:
In short order, as of 10/03/20 the markets are down some 17%.
Down markets are hardly a new phenomenon, and such moves happen on average almost every 2 years. There is almost always an event in the news that is scary on the surface: images are conjured up that suggest that whatever is happening and its fall out are totally uncontrollable, and that the world will surely sink.
For example, in 2011 we were told that the Greek default would have taken Europe down and subsequently Europe was going to take the rest of the world down. The reality is that such extreme negative scenarios rarely come to fruition.
Mankind finds a way out. Economies adjust and march higher. As do stock prices. With hindsight, it becomes apparent that mankind is just not that easy to kill. The panic selling was just another buying opportunity.
The coronavirus that is expected to sink the world.
The spread is indeed a scary event on the surface: one can die, it is spreading, and has now infected over a hundred thousand people.
It is perceived that the virus will seriously affect the world economy and is uncontrollable. Nothing could be further from truth. We as mankind have overcome or lived with bubonic plagues, the Spanish flu of 1918 that killed 50 to 100 million people, HIV that has killed 25 million people and infected another 65 million, SARS, Ebola and more.
Surely, we shall prevail.
We have an ENORMOUS knowledge of viruses – including their transmission and treatment – from history. Society at large is taking actions to control it. Entire cities are being shut down in order to contain the virus. Children are learning from home, and workers working online. Such actions are unprecedented in history. Science is at work and vaccines are being developed. We probably have more scientists alive today than all the scientists that lived in the 1900s. The tools that we have at our disposal to develop medicines are likely many fold superior to what we had just fifty years ago.
And all that against a virus that is not nearly as fatal as what we have lived with? Surely, we will prevail.
The 86 trillion-dollar behemoth:
The Global Economies are 86 trillion dollars in size and can handle all kinds of jolts and shocks to it. Those who are worried about cities being shut down need to remember that we can shut down entire countries, and it still may not be sufficient to derail the 86 trillion-dollar global economy!
In addition, mankind does not sit idle. Federal Reserve has already cut interest rates to help the economy. It will probably do more if needed.
The global tax cut.
A silver lining here is the collapse in oil prices. Every time gas prices go down in US by 1 cent, it adds a billion dollars to the pockets of consumers, which they spend. The underdeveloped world could use it even more than us in the West.
How illogical it was – and is now – to panic:
We urge you to put history and knowledge into perspective and remember what wonderful opportunities they were when the markets plunged. How silly it was to panic. How costly it would have been not to remember that markets behave like this every now and then, and that such moves need to be expected. We do not know how this will all end, but we know from history that it does not end badly enough that we should be throwing in the towel.
On the contrary, we should be adding to our holdings of good quality companies.
The Glass is half full:
We also invite you to do a mental simulation of the significant amount of wealth created in the stock market while wars were fought, and viruses were managed.
All one had to was to sit tight, believe in the future, and buy whenever one had money.
We advise you to do the same.