The one thing we know for sure

This week, there will be 1.9 million coronavirus tests shipped out to hospitals, government agencies and public health professionals all over America. The one thing we know for sure is that a lot of people will test positive for COVID-19.

This is bad. It’s also good. We cannot get our arms around this crisis without being able to separate the sick from the healthy. Massive amounts of testing is what led to Chinese and South Korean infection counts to skyrocket throughout the month of February, It’s also part of the reason they’ve been able to effectively halt the acceleration of spread. Apple has reopened over 40 of their stores across China as of this writing. That is remarkable. It’s the power of strong measures of social distancing. We aren’t there yet. We’re making progress.

So we know for sure that our headlines will get scarier this week, and probably next week too.

I am going to share with you something I said to the clients of our firm last week. I think it’s the most profound thing I have ever learned about crisis in the investment markets.

That something is this:

Without a doubt, the news will get worse from here. But its ability to shock us will diminish.

The economic news about the US economy was not getting better at the end of the financial crisis. But stocks stopped going down every time that bad news hit. It took a lot of pain to get to that point, but eventually, bad news fatigue had set in. This happened with regards to potential terror threats in the wake of 2001. It happened during the Asian currency crisis of 1998. It happened during the Latin American defaults of the same era. It happened during the Ebola scare of 2014. It will happen now.

You must be fully prepared for both foreboding news about the contagion’s spread and, yes, even the death rate. You must also be prepared for how bad the March economic numbers are going to be relative to February. Some of these comps are going to be so astounding that they’ll look like typos. And it’s highly doubtful that anything turns sharply higher in April, based on the fact that nearly everything under the sun has been or will be canceled other than walking the dog and surfing the web. Kroger, Costco, Amazon, Target, CVS, Walgreens, Walmart and maybe Home Depot excepted – the nesting business is booming.

But as bad as the news will be, its ability to shock us will diminish. We will reach the point of “Let me guess, sales are down this month.” The shocks – and there are many shocks still to come – will continue. But our reaction to them cannot remain at the current intensity forever. We are not going to have a 75 Vix for six straight months.

If we know one thing for sure, it is this.

You’ve read plenty of negative things by now. It would not be useful to share more of that with you. So permit me to share two things that are optimistic. You can call me names and laugh at me for looking forward if you want, but I’ll still ask you to read these things anyway. Unless you plan on letting your business fail, your home fall into disrepair and your retirement dreams to fade away into the aether. I do not.

Brian Wesbury at First Trust makes a powerful point here:

Reasons to Be Positive About the US Coronavirus Fight (First Trust)

Michael points out that “Once stocks fall 20%, long-term returns start to improve with every painful leg lower.” Well, you’ve already witnessed part one of that statement. At least bring yourself to read about what part two looks like…

What Happens After the Stock Market Falls? (The Irrelevant Investor)


Ritholtz Wealth Management believes in a combination of both strategic asset allocation and tactical management to address the needs of investors. You can learn more here:

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