A Personal Note from Cam – Dated April 2, 2020
Please Share This with Your Family and Friends
Against the odds, the world is pulling together. Based on what I have personally seen and experienced, it seems that people from all walks of life are working together and helping each other out as humans always have when facing truly trying times.
I have always found that even in the most run-of-the-mill times, there is something to learn every single day. This past week was no exception, but given the seriousness of what we are facing, it sometimes felt to me like the lessons were a bit more momentous than normal. We have learned a lot, but there is a lot more to learn.
The coronavirus – COVID-19- is dominating the news and dominating the realities of our daily lives—the daily lives of almost all people, everywhere, across the globe—the way few events have in the past century. It is powerful that we are all focused on the same thing, but this can also be disorienting.
I hope in this note to be able to help cut through some of the fear and anxiety that we are all feeling to one extent or another. As the saying goes, sunlight is the best disinfectant. The more we talk about these things, and talk about them with clarity, the better off we will be.
Forgotten in a First Quarter to Remember
Tuesday marked the end of the First Quarter of 2020. It was a quarter for the record books, an exercise in excesses, high highs and low lows. It’s easy to lose sight of everything that happened on the road we took to get here. I think it might be helpful to take a quick look back before we take a deeper look ahead.
The year 2020 started off with a bang—and a World War III that never was. This wasn’t so long ago!
On January 3rd, a US drone killed Iranian major general Qasem Soleimani of Iran’s Revolutionary Guard in Baghdad. Soleimani was widely considered to be the second most powerful man in Iran, responsible for organizing military, paramilitary and terrorist actions throughout the Middle East and beyond.
Following the attack, militaries around the world went into a state of high alert, and it seemed the US and Iran might be preparing for war. On January 6th, millions of people participated in Soleimani’s funeral procession in Iran, which became the largest funeral in Iran since the Ayatollah Khomeini’s in 1989. On January 8th, Iranian President Rouhani announced that Iran would no longer stick to the 2015 agreement it had with the US which restricted the enrichment of uranium. That same day, Iran launched multiple waves of ballistic missile attacks against US military forces on bases in Iraq.1[i] Then, four hours after launching the missiles, while on a state of high alert expecting US retaliation, Iranian defense forces mistook a civilian airliner for an American missile, and shot it down shortly after it took off in Tehran. All 176 people on board the Boeing 737 jet were killed.[ii] For a minute, it seemed like things might take a serious turn for the worst. But then cooler heads prevailed, and both sides backed down.
Beginning near the end of 2019 and burning all the way until mid-March 2020, bushfires raged in Australia to such a devastating effect that it came to be known down under as the Black Summer. It is believed that almost 75,000 square miles were scorched—an area roughly half the size of California. Approximately 6,000 buildings were destroyed, nearly 3,000 of those buildings were homes. 1.25 billion animals were killed. And at least 34 humans lost their lives. The smoke was so severe it crossed the Pacific Ocean and impacted air quality from Chile to Argentina.[iii] This natural disaster was so frightening in scale, it seemed almost apocalyptic. Thousands of people were displaced, and government leaders and environmental stewards talked about a recovery that would last decades. People from around the world rallied to donate to the cause.
Both of those events were major stories.
Lest we forget, here in America we were also dealing with the impeachment of Donald Trump, the 45th president of the United States. The inquiry stage of Trump’s impeachment lasted from September to November, and on December 18, 2019, the House of Representatives approved articles of impeachment on charges of abuse of power and obstruction of Congress. Trump was acquitted by the Senate on these two counts of impeachment on February 5, 2020.
In fact, at the time, each of these stories was so huge that they seemed like they might have world-changing influence. Today? Well, they don’t seem quite so huge. Our perspective changes with the passage of time.
There were many other big stories in the first few months of the new year. Russia and Saudi Arabia engaged in a high stakes brawl over the pricing of oil, which cast crude oil into a tailspin, eventually dropping it to a 20-year low. In February, which feels like a long time ago, the Dow Jones Industrial Average and the S&P 500 reached their highest levels in history. The record bull market had been going strong for 12 years, with seemingly no end in sight. But all of that was undone—and everything else that happened in the quarter made to seem insignificant—by the emergence of the biggest and most startling story of them all, the spread of a mysterious virus out of China.
Knowledge is Power
It is critical that we make decisions informed by the best information available. Knowledge is power. That is why we have been urging our clients to seek out information from the experts. In this case, that means getting info from the US Centers for Disease Control and Prevention (CDC), as well as the World Health Organization (WHO) at the United Nations.
But while we all rely on agencies like the CDC and the WHO during times like this, the information they share and recommendations they produce are dependent on reliable data being reported to them by governments. When determinations are not being made with the most accurate information possible, it affects us all.
Everybody from President Trump to health officials in the US and around the world has questioned the validity of China’s coronavirus numbers at one point or another during this crisis. How was it possible, people wondered, that China, a nation of almost 1.5 billion people, could have fewer cases and deaths from the virus than Western nations like Italy, which is dramatically smaller than it? A series of news reports that came out on the final day of March shed new light on this mystery. China, it turns out, has not been listing people who have tested positive for coronavirus unless they were outwardly symptomatic.[iv]
This is an important discovery. It means that untold thousands of people in China tested positive for the virus, but were not recorded on the official stats, and not forced into quarantine, despite the fact that they had tested positive for the virus.[v] While these people were asymptomatic, we now know based on the experiences of nations around the world, including the United States, that those people who were carrying the virus easily could have infected other people.[vi] How many people? It’s hard to say. But, “early signs are that it could be a substantial number, and these stealthy carriers are still infectious—a key reason why the pandemic has spread so widely across the world in a short time.”[vii]
As doctors and government officials work rapidly to flatten the curve and slow the spread of the virus in the coming weeks, it will be critical now more than ever as we move forward that they are working with accurate information.
Bay Area Bellwether
Over the past month, the number of people infected and the number of deaths around the world have both risen exponentially. We have every reason to think that in the coming weeks things are going to get a lot worse before they get better. But one potentially positive development that was announced by media outlets on March 30 should give all of us reason to feel at least a little cautious optimism.
The six Northern California counties that make up the Bay Area became the first areas in the United States to impose a stay-at-home order on residents to slow the spread of the virus. After two weeks, social isolation, combined with social distancing, has led to flattening the curve, lowering the rate of transmission, and reducing stress on hospitals.[viii]
This comes on the heels of study results that show that social distancing is breaking the chain of infections, as measured in the rate of fever occurring in the population. The rate of fever fell more than 60% in Santa Clara County during the period of initial social isolation and social distancing—in other words, the mitigation measures are working and doing exactly what they were supposed to do. This is great news![ix]
Despite having proof, Governor Ron DeSantis of Florida publicly disagreed with the recommendations he was receiving from his state health officials, and chose not to order measures similar to those ordered in California. As a result, at the exact same time the rate of fever was falling dramatically in Santa Clara County in California, the rate of fever rose in Miami-Dade County in Florida, as did the corresponding total number of cases.[x]
What can happen when governments take the threat of the virus seriously can be seen very plainly by looking at the most sobering metric of all. As of this writing, California, the largest state, with a population of 40 million, has experienced 150 deaths due to coronavirus. Louisiana, which has a population of only 4.7 million, has experienced 240 deaths.[xi]
Why the discrepancy? Local and state government officials in California imposed strict measures aimed at combating a serious threat. In Louisiana, on the other hand, many local and state leaders mocked the threat.[xii] A prominent pastor in Baton Rouge defied multiple orders and hosted church services for thousands of people.[xiii]
I bring up this range of current examples to only suggest this: America is big place with a big range of people and attitudes. That is what makes America great! But we now have scientific proof that social isolation and social distancing work. This is great news! There is nothing to debate. We know what actions help to save lives, and which actions recklessly endanger lives. Information is power. We are confronted right now with empty streets, closed businesses, closed schools, while hospitals are bursting at the seams.
What happens outside of our hospitals determines what happens inside of them.
Tallying the Economic Impact of the Coronavirus
This past Sunday, March 29th, President Trump extended his administration’s recommendation that all citizens practice social isolation and social distancing through the end of April. Without proven antiviral treatments, given that we are 12-18 months away from having a vaccine, and since we don’t have time to allow the virus to run its course so the world population can achieve herd immunity naturally, social isolation and social distancing are clearly the best and only response we have for the virus at this time.
Of course, paradoxically, this necessary lifesaving lockdown has the unfortunate side effect of essentially forcing our economy into a recession. When businesses are shut down, and workers are furloughed or laid off, the economy grinds to a halt. I have zero doubt that we are in a recession right now—and for that matter, probably every other country on earth is too—though it will be a while before our government technically confirms this. We know we are in a recession right now because we had to choose to go into one to stop the virus—that is the reality we were faced with.
The economic ramifications of this in the short-to mid-term are difficult. On Monday, March 30th, the St. Louis Fed projected that “the coronavirus economic freeze could cost 47 million jobs and send the unemployment rate past 32%.”[xiv] They further estimated that 67 million Americans are currently working in jobs that are at a high risk of layoffs. But while these estimates sound alarming, the duration of these negative job numbers “should be short-lived.”[xv] In addition, current GDP projections for the Second Quarter range from bad to really bad. But this bad news, borne out of a once-in-a-century worldwide health crisis, is not inexorably tied to certain doom on the stock markets.
Are we in a bear market? Last week did we exit a bear market? Is the bear market just getting started? Technically speaking, a bear market is a drop of 20% or more off a previous market closing top. We never really know for sure when we hit the highest of the highs or the lowest of the lows until many months after the fact. It is possible that we just witnessed the shortest bear market on record—just 11 days—and it is also possible that we just experienced a dead cat bounce, and the bear market is just getting started. Since 1929 the S&P 500 has suffered only 14 bear markets, 15 if you include the 19.8% drop that ended on Christmas Eve, December 24, 2018. That’s 15 times in about 90 years.
The financial markets hate uncertainty, and for the past few weeks the markets have been feeding on a steady diet of uncertainty. But the uncertainty surrounding the virus situation is going to steadily decline with each passing week. Yes, President Trump declared a national emergency, and congress finally passed a multitrillion dollar relief bill, and the Fed cut interest rates to zero, and then began pumping absolutely unprecedented amounts of liquidity back into our financial system. Those were all positive steps, necessary steps to be taken. More steps like these, possibly even bigger steps, will certainly need to be taken in the weeks and months ahead.
The most critical step of all, though, is getting the spread of the virus under control so that America, and the rest of the world, will be able to resume positive economic activity.
While we wait for that process to play out, it might be prudent to reflect on the fact that this challenging and difficult moment in history is exactly the reason we spread out your investment and portfolio risk by using high-grade bonds and inflation-adjusted Treasury instruments, and why we diversify your equity holdings among large and small caps, growth and value stocks, and foreign and domestic companies. You have planned and strategized with us to weather this storm.
As much as possible, try to focus on facts and fundamentals, tune out the noise, keep focused on your long-term goals, and let the benefits of diversification play out.
Staying in the Solution
It can be difficult to keep yourself on track when everything is going great. During times like this, I think it’s especially important to stay centered, and to make an extra effort to stay in the solution. To me “staying in the solution” means choosing to focus on what truly matters, and being a part of building things up instead of getting caught up in thinking about how to tear things down. I personally choose a mindset of abundance, as opposed to a mindset of scarcity.
I have found some tools and exercises to be particularly helpful for me along those lines. I meditate. I pray. And I journal. Every day I find time to write out, by hand, the things that are bugging me, the things I am trying to figure out, at work, and personally. I have found there is something very therapeutic about doing this—and I always have more clarity when I am done than I had when I started. When I write down things that seem difficult or overwhelming, I have found that the very act of writing about it changes my relationship to it, changes my perspective, and helps me discover new insights I didn’t have before.
Sometimes, when I’m working my way through a particularly challenging issue, I turn to a worksheet that I learned to use years ago from The Strategic Coach organization in Toronto. The worksheet is titled “Scary Times” Skills. It is organized into a few columns. You begin by writing down a “Scary Time.” Then you write down why it was scary, followed by what you learned from the experience. Finally, you translate this into new lifetime skills you acquired as a result of going through the scary time and processing it in a productive way. I find it to be a helpful little exercise for demystifying challenging or frightening experiences, and recognizing that you have gained invaluable insight and new skills as a result of going through it.
I have shared it with a couple clients, and after that positive experience I wanted to offer the worksheet to you. I have found that it can be a helpful tool for communicating with loved ones or other professionals as well. If you would like a copy of it, or if you think of someone who might appreciate it, send me an email or call our office, and we’d be happy to share it.
Finally, I wanted to share a note about a beautiful exchange I had with a delightful woman, my oldest client. She is 106 years young, still living in her own home, with an incredible attitude and outlook on life as she, like the rest of us, is dealing with the changes the coronavirus has brought about.
Before COVID-19 and ‘stay-at-home’ became the norm, I would visit her by phone weekly and swing by her home every other week just to chat with her. Over the 30+ years I have known her, she has always helped me focus on the importance of living in the moment and being completely grateful for the gifts God has provided me with.
When we talked the other day, she was excited to share that she is now able to attend church services via an internet stream on her iPad, from the comfort of her living room. She explained that she was going to participate in a video chat with her bible study group the next day.
While some of us have been frustrated by the isolation we have had to engage in in the name of personal safety, my dear friend was looking at this as another opportunity to learn about new technologies, to stay positive, and stay connected with family and friends. What a beautiful perspective!
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Securities and some investment advisory services are offered through Cetera Advisor Networks LLC, member FINRA/SIPC, a broker/dealer and Registered Investment Adviser.
Financial Planning and some investment advisory services are offered through Cameron Thornton Associates, a Registered Investment Adviser.
Cameron Thornton Associates and Cetera Advisor Networks LLC are non-affiliated companies.
The opinions expressed in this letter are those of Cameron M. Thornton, CFP® and Trevor M. Cole, CFP®. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. All economic and performance information is historical and not indicative of future results. Past performance does not guarantee results.
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[i] “2020 Baghdad International Airport airstrike.” Wikipedia. <https://en.wikipedia.org/wiki/2020_Baghdad_International_Airport_airstrike#Aftermath>
[ii] “Ukraine International Airlines Flight 752.” Wikipedia. <https://en.wikipedia.org/wiki/Ukraine_International_Airlines_Flight_752>
[iii] “2019-2020 Australian bushfire season.” Wikipedia. <https://en.wikipedia.org/wiki/2019–20_Australian_bushfire_season>
[iv] “China Reveals 1,541 Symptom-Free Virus Cases Under Pressure.” Bloomberg News. March 31, 2020. <https://www.bloomberg.com/news/articles/2020-03-31/china-reveals-1-541-symptom-free-virus-cases-under-pressure>
[v] “China did not count coronavirus positives if patient had no symptoms: report.” The Hill. <https://thehill.com/policy/international/490315-china-did-not-count-coronavirus-positives-if-patient-had-no-symptoms>
[vi] “China Reveals 1,541 Symptom-Free Virus Cases Under Pressure.” Bloomberg News. March 31, 2020. <https://www.bloomberg.com/news/articles/2020-03-31/china-reveals-1-541-symptom-free-virus-cases-under-pressure>
[vii] “China Reveals 1,541 Symptom-Free Virus Cases Under Pressure.” Bloomberg News. March 31, 2020. <https://www.bloomberg.com/news/articles/2020-03-31/china-reveals-1-541-symptom-free-virus-cases-under-pressure>
[viii] “Bend it like the Bay Area: Doctors see flatter curve after 2 weeks of social isolation.” Politico. <https://www.politico.com/states/california/story/2020/03/30/bend-it-like-the-bay-area-doctors-see-flatter-curve-after-2-weeks-of-social-isolation-1269663>
[ix] “Bend it like the Bay Area: Doctors see flatter curve after 2 weeks of social isolation.” Politico. <https://www.politico.com/states/california/story/2020/03/30/bend-it-like-the-bay-area-doctors-see-flatter-curve-after-2-weeks-of-social-isolation-1269663>
[x] “Social Distancing May Be Working, New Study Hints.” WebMD. <https://www.webmd.com/lung/news/20200326/social-distancing-may-be-working-new-study-hints>
[xi] Covid-19 Tracker. Bing. April 1, 2020. < https://bing.com/covid/local/unitedstates>
[xii] “John Bel Edwards’ coronavirus orders from ‘ivory tower’ are ‘out of line,’ Rep. Higgins says.” The Times-Picayune. <https://www.nola.com/news/coronavirus/article_2c888764-6865-11ea-b11b-136b56da40dc.html>
[xiii] “Louisiana pastor defies coronavirus order.” NBC News. <https://www.nbcnews.com/news/us-news/louisiana-pastor-defies-coronavirus-order-draws-over-1-000-people-n1168501>
[xiv] “Coronavirus job losses could total 47 million, unemployment rate may hit 32%, Fed estimates.” CNBC. <https://www.cnbc.com/2020/03/30/coronavirus-job-losses-could-total-47-million-unemployment-rate-of-32percent-fed-says.html>
[xv] “Coronavirus job losses could total 47 million, unemployment rate may hit 32%, Fed estimates.” CNBC. <https://www.cnbc.com/2020/03/30/coronavirus-job-losses-could-total-47-million-unemployment-rate-of-32percent-fed-says.html>