One of the bright minds of the investment world is Howard Marks – even Buffett listens when Howard speaks. And Howard recently wrote about “Knowledge of the Future.” In a memo to his clients he quoted a Harvard epidemiologist who shared that there are a) facts, b) extrapolation, and c) speculation or opinion. Specifically, regarding the future, there are few facts, the extrapolations being made don’t have many meaningful precedents, and that most of what we’re hearing is speculation.
This applies equally to COVID-19 as it does to predictions about the market and we’re seeing it play out before our eyes. The fact that investors and epidemiologists are inextricably linked at the moment, is both unprecedented and somewhat mind-boggling. But today is yesterday’s future, and since there are few reliable facts about the future, today is unlike anything we’ve seen.
For example, often when markets are down, we see stocks being bought up at a discount, indeed we’ve been asked by many clients if it’s time to buy. But even Buffet isn’t finding great deals at the moment. In a Bloomberg article, Buffett’s Chance for a Blockbuster Deal Faded When Fed Stepped In, it speaks to the impact that the Federal Reserve has made by providing so much liquidity, and actually purchasing certain assets. Similarly, a UBS survey (US investors have piled $1 trillion into cash during coronavirus lockdown, but UBS says ‘rushing to the exits’ and abandoning the markets is not the answer) points to wealthy clients who are sitting with cash and waiting. They aren’t jumping in either.
The conditions we’re seeing today aren’t like past scenarios, and with few facts available about the future, extrapolations become blurry, if not risky. So what’s a family to do with its wealth? Here are a few key things:
- Have you worked with us to put a financial plan in place? Most of our clients have, and if so, this is a good time to take a fresh look at it and especially think about your vision for the future. Has it changed? Is it still relevant to you? Is it accurate? If so, stay the course.
- If you don’t have a financial plan, this is the time to get it. Period. Reach out to us and let’s work together and put a plan in place that will guide you to your outcomes, in a way that makes sense to
- Keep going. If you have a 401k plan, keep contributing to it. If you’ve been setting money aside to invest, keep doing that. This isn’t the time to stop.
- Stay focused on the big picture. While the situation is unprecedented, we also know that the storm is much worse when you’re in it. This is not a permanent condition.
Something you may want to consider in the weeks ahead is your intake of media. Right now, the flood of messages about the severity, the bounce back, the flattening, the opening, the closing, the rise and fall, the policy and politics, is overwhelming. News is done in snippets and life is lived in years. This is about your life, don’t get bit by the sound bites that have one goal: to hold your attention at all costs.