During these very volatile times, we address below a few questions that might be on the minds of our clients:
- Can the financial markets continue to function if people are forced to stay home?
Yes, the major exchanges have systems in place to ensure that trading can be conducted remotely. Previous financial crises, and the impact of Hurricane Sandy, forced the exchanges to develop improved continuity plans, which include requirements to test the plans and update them regularly.
Announcements yesterday by the U.S. Federal Reserve and the European Central Bank included great news as each organization provided a liquidity rescue in support of the financial markets. Normally, these steps would be cheered by investors, but the news was overshadowed by corporate announcements that staff were being sent home to work remotely, and the news of the suspension of events such as the NCAA tournament.
- Will I be able to access monies held securely at my custodian?
Yes, you will have access to your monies at your custodian. Because many of our clients have their assets with Charles Schwab, we have been in direct contact with our teams there. We know that that they have proactively employed their business continuity teams to test and update their systems on a regular basis. Knowing that their systems were tested successfully following the earthquakes in San Francisco a few years ago provides us with even greater confidence.
- Will the availability of Stegner Investment’s associates be impacted by unfolding events?
No, we also have a business continuity plan in place that will allow us to work remotely if necessary. Luckily, we have our own facilities and commutes to the office are not constrained by public transportation. For us, it will be business as usual.
- How can I maintain a long-term investment strategy with all of the short-term volatility?
Clearly our investment disciplines are being challenged as stocks plunge and investors try to price-in the economic damage to global commerce, while “normal life” is shutting down to reduce the spread of the virus.
It is very important to note that this is NOT like the 2008-09 financial crisis. While the recent announcements will surely impact our economy to the downside, once these threats pass, we will move forward again. When the virus panic struck a few weeks ago, the U.S. economy was considerably stronger than in 2008, with a buoyant labor market, low unemployment, significantly better capitalized banks and corporations had plenty of cash on hand.
In addition, central banks around the world are in a much better position to assist with their policies.
We remind you of the thoughtful decisions we made regarding the asset allocation of your portfolios that included assessments of both emotional and financial risk tolerance. Times like these test those tolerances, and our assessments have always included “worst case” scenarios like the one we are experiencing this week.
Monies that cannot be at risk, i.e.: those funds needed for withdrawal purposes for the near future, are not invested in stocks. These balances are held in bonds and money market funds that have maintained their values as stocks have declined. We are not forced to sell stocks at this time.
Below is a link to an article published this week in the Wall Street Journal summarizing the excellent advice from Benjamin Graham’s, The Intelligent Investor. Please take a calming moment to read.
Looking in the Mirror