Perspective on Recent Volatility
We know that regular communication with you regarding your investments is very important as we all go through this ordeal together. Today, our message is intended to convey a strong sense of confidence in a brighter future ahead!
As economic productivity slows dramatically around the globe, financial markets continue to experience extreme volatility on a daily basis. However, most investment advisors are already beginning to look ahead at the global economic recovery that is sure to follow this health crisis. This week, during a conference call with executives from over 1500 U.S. companies, Goldman Sachs stated their opinion of our current economic situation:
“There is NO systemic risk. No one is even talking about that. Governments are intervening in the markets to stabilize them, and the private banking sector is very well capitalized. It feels more like 9/11 than it does like 2008.”
The distinction between a 9/11 type economic shock vs. a 2008 economic event is important. The financial recovery after 9/11 was quite rapid because the banking system, unlike 2008, was very healthy. This is also the case today.
U.S. Federal Response
On Sunday, the Federal Reserve slashed interest rates by 1.00% to a benchmark rate of between 0% and 0.25%. This ensures that U.S. banking institutions will have full liquidity during this crisis. The Fed is also purchasing mortgage-backed securities to ensure that Americans will have no trouble refinancing our mortgages and other debts at historically low interest rates.
Today the Defense Production Act was invoked (typically only done during war) which will unleash the full might of U.S. industrial power in the production of medical supplies such as ventilators, masks, gloves, and critical drugs.
Finally, as of 2 pm today, Congress is working on one of the most massive economic stimulus packages in our Nation’s history which will be designed to dampen the economic blow to families and critical industries which have lost important income during this crisis. Political parties are putting differences aside and Americans are coming together like never before to defeat and overcome this health threat.
Your Investments - What Should You be Doing?
We believe the most important thing that we can do for our clients today is to help you put this current market volatility into historical perspective and to help prevent you from making investment decisions today that could hurt your financial future.
Below is a link to a 30-minute video produced by Dimensional Fund Advisors last Friday which provides a “Perspective on Recent Market Volatility”. We strongly encourage you to take the time to view it!
Click HERE to view a wonderful education video.
DecisionPoint continues to believe that equities (stocks) are presenting a historical buying opportunity at current prices. We encourage you to contact us if you would like to discuss your investment allocation, or if you simply want to talk.
As always, please reach out if we can be of assistance!
- Your DecisionPoint Financial Planning Team -