Financial markets continued to fluctuate last week. The main cause of this continued volatility is the uncertainty surrounding the long-term effects of the COVID-19 outbreak. Above all, the market hates uncertainty, which is why we are optimistic that in the coming weeks as we learn more, we will begin to see the markets stabilize and then begin to recover.
From a technical standpoint we believe the market is currently testing the bottom, which was established on March 23rd. In the short-term we expect continued volatility as the market tests the lows of March 23rd. This is part of the recovery process and once the base is established, we believe sustained growth will begin.
It’s important to remember that this market downturn was not caused by underlying economic or market weakness. A typical recession is caused by severe economic and financial imbalances, coupled with tightening monetary policy. None of these factors were present prior to the COVID-19 outbreak. Truly, “it is different this time.”
Our optimism is based on the fact that prior to the COVID-19 outbreak, the fundamentals of the U.S. economy were strong and growth was healthy. While the final chapter of this market cycle remains to be written, the most likely outcome seems to be a quick and substantial recovery.
A word about account statements: March 31st marked the end to the first quarter and within the next week or two you will be receiving a copy of your account statement. This statement will likely show a decrease in the value of your investments. Please keep in mind that unless something has changed with your investment time horizon, objectives or risk tolerance, there is no compelling reason to change your investment discipline. We believe that investors who stick with their investment strategy and maintain a diversified portfolio are prepared to weather this current market volatility and poised for our eventual recovery.
Our job as your financial advisers is to manage risk and focus on the future. We take our responsibility to you very seriously and remain committed to providing you the best service and advice possible. You can count on us to monitor your account, evaluate market changes and provide appropriate guidance.
*Past performance is no guarantee of future results.