Market Update – March 9, 2020

Needless to say, today is an ugly day for the stock market, with the Dow Jones down about 2,000 points (8.0%) as I write this.  I’ve been through this before and am confident that it will turn around.  The thing I do not know and cannot tell you is when.  So, let me give you my current thoughts in bullet form.

  • Back in 2009, the market collapsed and according to today’s Wall Street Journal (March 9, 2020, Pg. B1), Warren Buffet told CNBC that the U.S. economy had fallen off a cliff.  The next day, it turned higher and continued higher.
  • This may or not be different.  But we see enough differences that conservatism is prudent.
  • What we are seeing now is panic, indiscriminate selling, created by the corona virus.  Why?  Because we do not know how long or extensive the economic impact will be.  We are in unchartered territory since most downturns are triggered by some known event.  Hurricanes are not only known events of limited duration, we can estimate what the effect will be on the economy.  Not so with the corona virus.
  • Unknown and uncertainty are always detrimental to the stock market.
  • On the plus side, the U.S. economy was strong before the corona virus hit,. so, this indiscriminate selling is creating buying opportunities.

My Approach

  • We are very selectively moving some positions temporarily into cash.
  • All sell orders are entered as “limit orders”, since we are unwilling to sell indiscriminately.  (Limit orders must be sold at a price we specify, or better than this price.)
  • We are spending time identifying opportunities in high quality investments.
  • We are sticking with high-quality mutual funds and ETFs.
  • We favor:
    • Large-cap stocks since these companies will be hurt the least in a recession.
    • Technology companies, which do not require a store-front and have minimum personal exposure to customers.
    • Healthcare companies.
  • We are minimizing exposure to small-cap stocks.
  • A diversified portfolio still remains prudent.

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