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The False Assumptions of Retrospect

I think a lot of us—myself included—are wondering why, when we heard about the “Wuhan Virus” (as it was called back then) wreaking havoc in China, we didn’t advise people to move their portfolios safely to the sidelines.  Didn’t we know that the virus would eventually make its way across the ocean and have a similar impact on the U.S.?

Isn’t this mess we’re in obvious in retrospect?

Truth is, we’ve actually experienced quite a few major flu epidemics, some of them coming from Asia, which ultimately had very little impact on our economy and our markets.  Before most of our times (1957-58), the first “Asian flu,” the H2N2 virus, caused roughly two million deaths worldwide, and caused barely a ripple in the economy or the markets—and certainly not social distancing or major runs on toilet paper. 

The 1968-69 “Hong-Kong flu” (H3N2 virus) killed a million people globally.  It didn’t stop the economy in its tracks or trigger social distancing.  The grocery aisles remained full and people still went to school and work.

Remember the 1997 “Bird flu?”  The H5N1 epidemic caused a worldwide scare, but once again, the economy moved on without a ripple.  Then came SARS—Severe acute respiratory syndrome, caused by a novel bug called a coronavirus.  In 2003, it roared out of Asia and spread to more than two dozen countries, infecting more than 8,000 people and killing 774.  But again, the social/economic impact was minimal.

The 2009 “Swine flu” (H1N1 virus) originated in Mexico, mixed with a Eurasian swine flu virus from Europe and killed more than 18,000 people around the world.  Turns out 2009 was a good year for the markets and the economy, as it recovered from the Great Recession.

The point here is that there have been major flu outbreaks in the past which looked just as scary as this current coronavirus, and ultimately were not portfolio-altering events.  There was no reason to imagine that this current flu outbreak would lead to the current social distancing economic lockdown—no matter how “obvious” it might seem in retrospect.  If you’re blaming yourself for not seeing this current market downturn and economic stoppage in advance, then please consider our experience with past disease epidemics, and realize that there was nothing to suggest this time it would be any different.

Feel free to share this perspective with your clients.

A few advisors have commented on my previous messages.  Jim Wooley, of Mammoth Financial in Twin Falls, ID, noted:

I’ve spent weeks asking clients and business associates how they were doing and listening to their concerns/fears, as is my job.  But no one was asking me how I was doing. I so appreciate you thinking to send out a mass encouragement to those of us on the front line.

An advisor who prefers to remain anonymous feels a bit better for having taken a particular kind of precaution for clients—which, of course, is not completely appreciated:

I run a “buckets” and “systematic withdrawal” practice, and 100% of clients, fortunately, were and are well prepared for “this” with about a 2 year bridge of reserve in place since late Jan 2020. We did not know what “this” was, but we were prepared.

Below, I share some of the client messages that I’ve received from advisors, edited to make them more generic.  Yes, the markets have been up for a couple of days, but I know your clients still want to hear from you.

Be safe, be kind and help others where you can.

Jean Sinclair (who happens to be my wife) wrote one of the best messages I’ve seen so far during the crisis:

Those of you who are of a certain age may remember the Roseanne Rosannadanna character from Saturday Night Live’s signature line, “It’s always something.” She might be right. And if you remember the character, then you’ve probably lived through all of the U.S. financial crises below. 

And you survived and even thrived during these more than three decades, and that is good for us to remember.

So here we are again, with yet another once-in-a-lifetime, or statistically impossible market decline. You might feel stressed, cooped up in your house, unable to go to your gym, yoga studio, see your friends, go out for dinner or do other things that you enjoy and that help you relax. Know that stress intensifies any negative thoughts and impairs your ability to think flexibly.


First, for your own emotional well-being, take control over whatever you can. This can take many forms, and here are some ideas:

  • Remain connected with family, friends, and people who make you feel better. If you want to see the person you’re talking with try Zoom, it’s free. Here is a download link:
  • Avoid or minimize communicating with toxic and negative people who drain your energy or damage your spirit.
  • Spend time in your garden or yard. It’s Spring time, so you can order seeds, plants and flowers online. Fresh air and getting dirt under your fingernails will do your mind and body good.
  • Work out at home.
  • Try meditation.
  • Complete some of your home projects.
  • Catch up on your reading, and if you need more books try supporting your local, independent bookstores who are offering delivery or curbside pickup services.
  • Watch movies or binge watch your favorite TV shows.
  • Bake some cookies or your favorite desserts. (I have a delicious, healthy, vegan, gluten-free chocolate chip cookie recipe that I will share if you ask for it.)
  • Cook creatively and experiment using what you have in your fridge and pantry.

Second, for your financial well-being:

The IRS has given you more time to file your 2019 tax return, extending the deadline from April 15th to July 15th. And if you owe taxes, you can wait to pay until July 15th without owing penalties or interest. Please be aware that not all states are conforming to the new federal deadline, so check with your CPA or your own state taxing authority for that deadline.

And you have more time to make your 2019 IRA contribution or Health Savings Account contribution as that deadline is also now July 15th.

And for yourself, your community and our economy: 

You, my clients, are more affluent than the average American as the median net worth of the average U.S. household is $97,300. Most of us have the ability to support our local economies, especially the small independent business and their employees. Think of your favorite restaurants and retail shops and imagine that they are out of business, replaced by chain restaurants and Walmarts. 99% of all businesses in the U.S. are small businesses, and 48% of all workers are employed by small businesses and they are not likely to get the kind of government bailouts that large companies will. You can:


  • Buy restaurant gift cards now for the places you know that you will frequent soon.
  • Get in-home free delivery through DoorDash, Uber Eats, Grub Hub, Postmates, etc.
  • Many dine-in-only restaurants are now offering to-go orders with curbside or counter pickup.

 I welcome your ideas about coping and how to support one another, and hearing how you are doing. I try to walk my own talk, and am doing everything on my list to maintain my own emotional well-being. Except meditation, which hasn’t work for me as I expected too much, like levitation on the first attempt. ?

 I remain calm and focused, and have the perspectives gained from my past 30 years as an advisor. This too shall pass, though it may not be easy. Know that I am here for you, and that we’ve done the work together to position your portfolios appropriately. I want you to focus on remaining safe and healthy.

Please take care of yourself and your loved ones ~ 

Josh Patrick, of Stage 2 Planning Partners in Burlington, VT offered another very good letter:

Hi friend,

I know that you don’t live under a rock so you know the coronavirus is causing havoc everywhere it goes and even where it hasn’t gone yet.  Like many of you, I’ve been glued to the news wondering when the news will get better.  It will get better, we just don’t know when and how this will happen.

One issue (and there are many that we’re facing now) is the not knowing thing.  Knowing gives us more comfort than not knowing, even if the news is terrible.

You may expect me to give lots of advice right now.  I don’t plan to do that.  You’re getting advice from a zillion different places, and I don’t need to add to the confusion that may exist.

Yes, the markets are plunging.  Yes, we don’t have nearly enough test kits and when we do, the number of cases will skyrocket.  The advice we’re getting from the science community seems to be good advice.  The advice from our politicians has been mixed.  The truth is with all the disinformation about the virus and its effects makes it more difficult to know what to do and what not to do.

The good news is that it appears the number of cases in South Korea and China are moving down.  South Korea has been testing extensively and is likely the best model for us to use right now.  I’m hoping that our government figures out how to get testing done widely so we know what the real issue and numbers are in the country.

For the time being, you know the drill. Wash your hands, cover your mouth when you sneeze, if you exhibit symptoms, call your health care provider for instructions on what to do next. If you exhibit symptoms, do not just wander into an emergency room or your doctor’s office till you call.

I have been taking and making calls with our wealth management clients.  We’ve been expecting a downturn in the markets, we just didn’t know what would trigger it.  Now we know.

The markets don’t like uncertainty.  That’s one thing we have a ton of right now. After we start seeing real numbers and see what the impact will be on the economy, I expect the markets will adjust appropriately… either up or down. 

In the past when pandemics came under control, markets corrected.  I’m hoping that’s true this time as well.  But no one really knows what’s happening at this point.  I expect that over the next few weeks we will gain more clarity, and we’ll be in a better position to take long-term actions to protect ourselves and our loved ones. 

I hope that all of you who are reading this are well and don’t get the virus. If you want to talk, just hit return or click on the link below to set a time.  Be assured that I and all of us are taking this very seriously and are monitoring the news and markets.


Bill Ramsay, of Financial Symmetry in Raleigh, NC offered this letter to his clients:

“This time is different.”  As the saying goes, these are the four most dangerous words for an investor.  And yet every time is different.  I have spent the past 35 years giving financial advice and this is now the fifth bear market I have navigated with clients.  While the catalyst was never the same, each time presented similar themes and investment behaviors.  

The most important similarity is there has always been a full recovery for broadly diversified stock portfolios.  While none of us have lived through a pandemic this significant, we do have some historical examples to draw from. Probably the most comparable is the 1918 flu pandemic and as bad as it was, the world did get back to normal.

Bear markets reinforce the value and importance of sound financial planning.  One of the key measures we pull from the planning work we do for our clients is their risk capacity.  At its core, risk capacity is about only investing in stocks with the portion of the portfolio that will not be needed to support lifestyle in the next 5-7 years.  Keeping this margin of safety provides time for stock prices to recover from a bear market.   We also use risk capacity to take advantage of opportunity by increasing our allocation to stocks.  Investing during a bear market is difficult and feels terrible every time.  However, the S&P 500 is 30% cheaper now than it was less than a month ago and we are taking advantage of the opportunity.

The drastic reduction in economic activity we are experiencing right now is vital to slowing the spread of this pandemic so that our healthcare systems can save more lives and provide time for developing treatments and vaccines.  While we do not know how effective these efforts to combat this pandemic will be, we do know that we will ultimately get to the other side where there is less risk to our health and recovered economic activity.

Looking at how stocks performed in prior bear markets is a helpful exercise to understand how stocks are likely to perform over the next few years.  In the last fifty years, there have been three prior bear markets of 30%+ in the U.S., and four in non-US developed markets.  In three of the seven cases, stocks had negative returns over the next 2-3 years, but in all seven cases, stocks had positive returns over the next four years, and by the fifth year, annualized returns were between 6% and 18%

With the current low interest rates, we estimate that cash and bond returns are likely to return between 0% and 4% over the next five years, so stocks are likely to provide significantly higher returns.  

While there is limited data from 1918, analysis that has been done indicates that the economy similarly had a significant decline in short term activity but recovered within a couple of years, and led to what we now call “The Roaring 20s.”  The most significant impact was the loss of life which appears to have been about 2% of the population.  We believe it is likely that our greater health technology capabilities will allow us to have less loss of life.   

Governments around the world are also being more proactive with actions designed to blunt the short-term economic impact, and hopefully allow for quicker recovery.  While it is impossible to time the bottom of the market with any accuracy, we are taking advantage of the higher future return potential this crisis presents.  This is a great time to be a long-term investor.

At Financial Symmetry we are investing the same way for ourselves as we are for our clients.  We are here to help you through this period of uncertainty as we believe the only way to benefit from the higher long term returns of equities is to endure their temporary declines.  Our staff is all working remotely, diligently reviewing portfolios and long-term plans, and available to answer any questions or concerns you have.  We will get through this together.

Finally, in the last message, I apparently mis-attributed what Craig Martin, of Family Wealth Consulting in San Jose, CA had said to clients.  Here is his message:

Your Professional Planning Team is watching the market frenzy.  What we see is that the news is now being imbedded into the markets – another way we describe this is to say emotions are now driving market prices – instead of financials. 

We know through last week, the U.S. business finances were at all-time highs over the longest economic surge in our history. The S&P 500 is down and global markets are down similarly.  Does this sudden downturn mean that the last 10 years of financial successes are suddenly lost? 

NO!  Of course not!  But investors’ emotions are acting as if they have either been lost, or will be lost. 

While we can easily agree they have certainly NOT been lost, we might argue if they will or not into the future.  As a voting machine, the market has voted that they will be lost.  We will wait to see if this vote by investors comes true or not, but keep in mind that all past such votes have been wrong.  Which means it is true that market prices have always gone up over longer time spans (about 10% / year over my lifetime) while the downturns never sustain.  Our discipline to hold on sets us up to ride the volatility, which means we will ALWAYS be in the recovery. 

Our peace of mind is in knowing that our discipline will statistically outperform those that vote with their emotions, even while we acknowledge how difficult it is to accept that fact as we watch this market volatility.  This too will pass.  

Bob Veres is collecting the best client communications from around the profession for the advisor community.  Here’s another example: