From the Stands- When David Ayres had a kidney transplant 15 years ago, the Ontario native was sure his days playing competitive hockey were over. But last week, at age 42, the Zamboni driver made his NHL debut. He was in the stands at Toronto’s Scotiabank Arena, watching the Maple Leafs play the Carolina Hurricanes, when Carolina’s two netminders went out with injuries. As the Maple Leafs’ designated emergency goalie, Ayres put on a Hurricanes uniform and hit the ice. He gave up two goals but then stopped eight shots, helping the Hurricanes win 6-3 and making him the oldest goalie in NHL history to win his regular-season debut. “It was awesome,” said Ayres.
Airway, Breathing, Circulation Saves the Day- An Australian man is being hailed as a hero after using CPR to revive a gecko who was drowning in his beer. The customer, known to his friends as “Slab,” thought at first that the lizard was a prank perpetrated by the Amble Inn’s staff, but after the bartenders denied it, he leaped into action, performing chest compressions and blowing air into the gecko’s mouth until it began to stir. “Look at this,” Slab shouted as the gecko ran up his arm. “I saved his life!”
Gargantuan Find!- Paleontologists have unearthed the remnants of a colossal turtle that patrolled northern South America some 10 million years ago. The Stupendemys geographicus grew up to 13 feet long and weighed 1.25 tons, and inhabited a giant wetland that once covered the region. These creatures were built for battle, reports Reuters.com. Fossils dug up in Colombia’s Tatacoa Desert and Venezuela’s Urumaco region—including a 9½-foot-long shell, the biggest ever found—show that males had front-facing horns on their shells that they may have used to tussle with other males over mates. Some Stupendemys fossils have bite marks and punctured bones, evidence of skirmishes with giant crocodilians. The enormous turtle’s diet “was diverse, including small animals—fish, caimans, snakes—as well as mollusks and vegetation,” said lead researcher Edwin Cadena, from the Universidad del Rosario in Colombia. The turtles died out about 5 million years ago, after the formation of the Andes dried out their watery habitat.
Weekly Focus – Think About It
“The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.”
–Sir John Templeton, Investor, asset manager, philanthropist
Take a deep breath.
We have experienced downturns before.
Think back to 2018. During the last quarter of the year, major stock indices in the Unites States suffered double-digit losses, much of it during December. What happened next? By the end of 2019, those indices had reached new highs.
The reasons for, and performance following, market downturns varies. The key is not to panic.
Last week, U.S. stock indices lost significant value when the coronavirus spread outside of China, and expectations for companies’ performance in 2020 changed. At the start of the week, markets anticipated positive earnings growth (i.e., higher profits) during 2020. By the end of the week, they suspected earnings might be flat for the year.
At the end of last week, FactSet reported 68 companies in the Standard & Poor’s 500 Index had offered negative earnings guidance for the first quarter. In other words, the companies didn’t expect to be as profitable from January through March as analysts anticipated. That’s fewer companies than normal, relative to the five-year average. However, the number could increase. FactSet’s John Butters explained:
“…early in the quarter, a number of S&P 500 companies stated they were unable to quantify an impact from the coronavirus or did not include the impact from the coronavirus in their guidance. Thus, there may be an increase in the number of companies issuing negative guidance later in the first quarter as these companies gain clarity on the impact of the coronavirus on their businesses.”
Changing profit expectations are one concern for investors. Another is fear. Investors are afraid the current economic expansion and bull market may end. At this point in the economic cycle, investors often are both hopeful and doubtful. The Economist explained:
“[Investors] hope that the good times will last, so they are reluctant to pull their money out. They also worry that the party may suddenly end. This is the late-cycle mindset. It reacts to occasional growth scares – about trade wars or corporate debt or some other upset. But it tends not to take them seriously for long.”
Currently, investors are reacting to the coronavirus. They fear it will be the catalyst that sparks recession. While that’s possible, in the past, markets have responded negatively to coronaviruses and then recovered. (Keep in mind, past performance is no indication of future results.) Barron’s cited a private wealth manager who pointed out:
“…this isn’t the first time that an epidemic has rocked the stock market. The S&P 500 fell 15 percent after SARS hit the market in 2003 but was up just over 1 percent six months after the outbreak began.”
No matter the reason, it is unnerving to be an investor when stock markets head south. There is nothing comfortable about watching the value of your savings and investments decline. Regardless of the discomfort, selling when markets are falling has rarely proved to be a good idea. Investors who stay the course may have opportunities to regain lost value if the market recovers, as it has before.
Investors also may have opportunities to buy shares of attractive companies at reduced prices. Warren Buffet offered this reminder last week in a Barron’s article:
“…[the coronavirus] makes no difference in our investments. There’s always going to be some news, good or bad, every day. If somebody came and told me that the global growth rate was going to be down 1 percent instead of 1/10th of a percent, I’d still buy stocks if I liked the price, and I like the prices better today than I liked them last Friday.”
Until the full effect of the coronavirus is known, markets are likely to remain volatile.
WHAT YOU SHOULD KNOW ABOUT THE CORONAVIRUS. The coronavirus is now officially known as Coronavirus Disease 2019 or COVID-19. Last week, it spread to countries outside of China. If there is any good news about the contagious disease, it is COVID-19 may be relatively mild.
In its February 28 briefing, the Director-General of the World Health Organization (WHO) stated, “It also appears that COVID-19 is not as deadly as other coronaviruses including SARS and MERS. More than 80 percent of patients have mild disease and will recover.”
The Director-General identified the symptoms of COVID-19 stating, “…for most people, it starts with a fever and a dry cough, not a runny nose. Most people will have mild disease and get better without needing any special care.”
Currently, more than 20 vaccines are being developed. In the meantime, there are things you can do to protect yourself. They include:
• Washing your hands with soap and water regularly or cleaning them with an alcohol-based hand sanitizer.
• Cleaning and disinfecting frequently touched objects and surfaces.
• Cover your mouth and nose with a tissue or your sleeve – not your hands – when you cough or sneeze.
• Avoiding close contact with people who are sick.
• Staying home and avoiding travel when you are sick.
• Contacting your medical professional when you experience symptoms, which include shortness of breath.
WHO also recommended educating yourself about the coronavirus. Make certain to gather information from reliable sources, such as WHO or the United States’ Centers for Disease Control (CDC), and have healthy skepticism when it comes to unknown sources. Misinformation and disinformation about COVID-19 have been spreading almost as quickly as the virus itself.
The Director-General closed last week’s briefing by saying, “Together, we are powerful…Our greatest enemy right now is not the virus itself. It’s fear, rumors, and stigma. And, our greatest assets are facts, reason, and solidarity.”
If you would like to talk about the potential economic effects, give us a call. We look forward to talking with you.
John Klevens, CFP ®
P.S. Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this email with their email address and we will ask for their permission to be added.
This material is intended to provide general financial education and is not written or intended as tax or legal advice and may not be relied upon for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. This material is for informational purposes only and is not an offer to sell or a solicitation to buy any securities.
Securities and Advisory Services offered by John Klevens through KMS Financial Services, Inc. Member FINRA/SIPC and an SEC Registered Investment Adviser. Klevens Capital Management and KMS are separate and unaffiliated.
Portions of this newsletter have been prepared by Peak Advisor
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* This newsletter was prepared by Carson Coaching. Carson Coaching is not affiliated with the named firm.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
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* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
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* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
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* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
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* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
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* Consult your financial professional before making any investment decision.
The Week Magazine
https://www.barrons.com/articles/dow-jones-industrial-average-suffers-worst-week-since-2008-recession-watch-begins-51582941142?mod=hp_DAY_1 (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/03-02-20_Barrons-This_Downturn_Might_Just_be_Getting_Started-Let_the_Recession_Watch_Begin-Footnote_4.pdf)
https://www.economist.com/finance-and-economics/2020/02/27/markets-wake-up-with-a-jolt-to-the-implications-of-COVID-19 (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/03-02-20_TheEconomist-Markets_Wake_Up_with_a_Jolt_to_the_Implications_of_COVID-19-Footnote_5.pdf)
https://www.barrons.com/articles/cash-rich-stocks-to-buy-amid-the-coronavirus-selloff-51582936062?mod=hp_HERO (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/03-02-20_Barrons-The_Dow_had_Its_Worst_Week_Since_2008-Where_to_Find_Cash-Rich_Stocks_in_the_Coronavirus_Selloff-Footnote_6.pdf)