We've begun this "What We're Thinking" series because, well, we're all in uncharted territory, and you have a right to know what's guiding and shaping our thinking. It's called transparency. And it underscores our commitment to a strong, conflict-free, fiduciary mission.
It's unknown if March 23rd was "the bottom" of the Corona Bear Market. Impassioned arguments are circulating on the topic. We're actually doing our best to just notice them for what they are-- entertainment and click-bait-- and stick with our strategic asset allocation. We're also finding that most clients need few, if any, portfolio adjustments. The damage to globally diversified, low-cost portfolios has not been fatal, nor has it even been irrevocable. As Bill Bernstein would say, "It's just fluctuation-- shallow risk."
The most important thing we saw this week was the monthly release of the University of Michigan Consumer Sentiment Index. This is one of our favorite indicators. It has a long record for showing how the nation feels. And it's been a remarkably accurate correlate to financial market inflection points. Also, notice how the extreme readings-- both high and low-- can persist for a few years.
As you can plainly see, a sharp drop took place this month. We expected a drop, but this is exceptional. In fact, it was record-breaking. So, what are the takeaways? What action might you take?
We think this is just the front end of a period of contraction and eventual recovery that may take several years. Understand that we might have strong opinions. But we hold them lightly.
The good news for investors is that this is likely to be one of those gift horse-prize pony moments we wrote about in February. The other part of the good news is that you don't need to be in a hurry. Patience and a long vision will carry the day.
Jim Cosgrove, CFP, Plano, TX jim.cosgrove@verizon.net 972-489-0262
Jim Cosgrove, Dir of Research, San Jose, CA jimcos42@gmail.com 408-674-6315
It's unknown if March 23rd was "the bottom" of the Corona Bear Market. Impassioned arguments are circulating on the topic. We're actually doing our best to just notice them for what they are-- entertainment and click-bait-- and stick with our strategic asset allocation. We're also finding that most clients need few, if any, portfolio adjustments. The damage to globally diversified, low-cost portfolios has not been fatal, nor has it even been irrevocable. As Bill Bernstein would say, "It's just fluctuation-- shallow risk."
The most important thing we saw this week was the monthly release of the University of Michigan Consumer Sentiment Index. This is one of our favorite indicators. It has a long record for showing how the nation feels. And it's been a remarkably accurate correlate to financial market inflection points. Also, notice how the extreme readings-- both high and low-- can persist for a few years.
As you can plainly see, a sharp drop took place this month. We expected a drop, but this is exceptional. In fact, it was record-breaking. So, what are the takeaways? What action might you take?
We think this is just the front end of a period of contraction and eventual recovery that may take several years. Understand that we might have strong opinions. But we hold them lightly.
The good news for investors is that this is likely to be one of those gift horse-prize pony moments we wrote about in February. The other part of the good news is that you don't need to be in a hurry. Patience and a long vision will carry the day.
Jim Cosgrove, CFP, Plano, TX jim.cosgrove@verizon.net 972-489-0262
Jim Cosgrove, Dir of Research, San Jose, CA jimcos42@gmail.com 408-674-6315
