Schindler Financial Newsletter Q1 2020

Aaron Schindler

Aaron Schindler

Coronavirus: Investing with Knowns & Unknowns

By Robert Lovenheim & Aaron D. Schindler, CFP ®

Copyright 2020 Robert Lovenheim and Aaron D. Schindler CFP, All Rights Reserved

March 2020 – You can’t enjoy wealth without good health.

Coronavirus headlines have now replaced winter storms as the “it’s coming” warning screaming from the press. It is easy to panic. Long-term investors should take a long-term approach with sound reasoning.

During the 2002 leadup to the US war in Iraq, Secretary of Defense Donald Rumsfeld famously said, “ there are known knowns; there are things we know we know. We also know there are known unknowns; … things we do not know. But there are also unknown unknowns— the ones we don’t know we don’t know.” (U.S. Department of Defense News Briefing, February 12, 2002)

The statement was laughed away by reporters who heard it, but it rings true for the situation in which we find ourselves now. It is too early to chart the full course or effects of the coronavirus. What we do know is, unlike the influenza epidemic of 1918, there is now a worldwide industry that develops vaccines for each new strain of flu and is usually well predictive of hitting the target. 

The New England Journal of Medicine estimates the virus’ mortality rate in China, the epicenter of the virus, at about 1.4%. The death rate from seasonal flus each year is about 0.1%, and the rate for the 1918 flu, long before the evolution of vaccine research, was about 2%. People over age 65 and people with weak respiratory systems are at greatest risk of mortality. (Denise Grady, The NY Times, March 1, 2020).

The “known knowns” are:

– Make sure to always have enough cash savings to see yourself through six months. 

– Own a diversified investment portfolio. If you are worried, maybe reduce the risk level of your portfolio allocation.

– Pay attention to tax management per using losses to offset gains. 

– Monitor national central bank announcements to lower interest rates to reduce the cost of borrowing and stimulate economies.

– Use sound reasoning as to where we might find investment opportunities in the coming months.

– Keep in mind that after steep declines, stocks usually (not always) have been up substantially a year later.

In terms of the stock market, we are focusing on supply disruption, especially the closing of factories that produce components for many industries from garments to cell phones. While it’s too early to estimate the economic effect of supply disruption, the sliding equity markets appear to be pricing in potential lower or negative earnings for Q1 and Q2 2020. 

We are not panicking. We are holding and seeking opportunities. We are researching stocks of companies that we would like to own, but believed they were too expensive before the spread of the virus. Hopefully, the virus is short-lived and the market panic is an overreaction that will offer the opportunity to own stocks at value prices. 

It is almost impossible to time markets and the potential spread and density of a virus. We don’t yet know if the trajectory of Covid-19 will be mild, moderate, or severe.

Investors should proceed with caution with a long-term view, and realize that what appear to be “value” stock prices can go lower before rising. We are also watching for signs that the virus is potentially waning to spur market recovery, particularly the decrease in the rate of contagion in China and other countries, the re-opening of factories in Asia, and a low rate of contagion spread in the U.S. 

Robert’s father always told him, “Today is the tomorrow you worried about yesterday, and all is well.”

Please don’t hesitate to contact me with questions, ideas or concerns at aschindler@wagllc.com or 917-715-2233

All best – Aaron

Aaron D. Schindler CFP®
Wealth Advisory Group LLC

Copyright 2019 Robert Lovenheim and Aaron D. Schindler CFP, All Rights Reserved

Not for reproduction without permission and consent by Lovenheim and Schindler

The above may contain general information about investment products. The information or opinions contained herein should not be construed as an offer to sell or the solicitation of an offer to buy any particular investment product. The opinions are solely of the representative/financial advisor and not of Guardian/Park Avenue Securities/Wealth Advisory Group or its affiliates, subsidiaries or other representatives/advisors. Such information is directed solely to individuals who reside in jurisdictions in which a representative is registered. Any subsequent direct communication with a consumer and/or prospective client shall only be conducted by a representative that is registered in the state where the consumer and/or prospective client resides.

Mutual funds/ETFs and other securities are not backed or guaranteed by any bank, nor are they insured by the FDIC and involve investment risk, including possible loss of principal. Past performance is not a guarantee of future results.

GLIC, PAS, WAG, its affiliates/subsidiaries/advisors do not render tax/legal advice. Consult your independent tax adviser/attorney.

Aaron D. Schindler is a Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS), 355 Lexington Ave, 9th Floor, New York, NY 10017, (212) 541-8800. Securities products/services and advisory services are offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America (Guardian), New York, NY. PAS is an indirect, wholly-owned subsidiary of Guardian. Wealth Advisory Group LLC and Robert Lovenheim are not affiliates or subsidiaries of PAS or Guardian.

95911 Exp 03/21