I never guess. It is a capital mistake to theorize before one has data. Insensibly one begins to twist facts to suit theories, instead of theories to suit facts. - Sir Arthur Conan Doyle
Here we are. Two plus months from when Covid-19 became real and schools and businesses began to shut down. Admittedly, things are probably as uncertain now in many areas as they were then. We still don't know if the virus makes round #2 this coming fall and winter - and if it does whether we will have an effective treatment. Vaccines look to come in early 2021 at the earliest.
Meanwhile, things in some areas have greater visibility or conditions are significantly improved. Testing has ramped up and in some areas of the country the ability to test and trace gives hope that opening up the economy will not result in an uncontrollable new wave of cases. Even more important, recent research from researchers in the UK gives us a better feel for mortality rates for both those who have pre-existing conditions as well as those who do not (~1% for the overall population and around .6% for those with no pre-existing conditions). This important data point should be instructive as we contemplate life without an imminent treatment or vaccine.
The good news: Covid-19 is not terribly dangerous to the vast majority of the population. However, for those who are 70+ or who have pre-exiting health issues the virus is deadly which means individuals and families in these demographics should be exceptionally careful.
The reason I present this information is hopefully obvious. The current state of the economy as well as financial markets are a mess. Investors are trying to digest unemployment figures last seen during the great depression. The Fed has unleashed financial stimulus programs which dwarf previous interventions. There are huge dislocations within financial markets - with large cap tech names near all time highs as small value companies sell as historical lows by comparison. Uncertainty about the future abounds...
Amidst the uncertainty, I'll make this statement: How you navigate the next year will to a large extent determine your family's financial future for the rest of your life. What do you do in such an environment? My strong suggestion is let data be your guide as you navigate both your finances and more importantly your family's health.
Embracing and following data will inculcate the following behavior:
- Special care and protection for those in a high risk demographic
- Opening of economic activity including across companies, municipalities, states and countries to let lower risk people back to work
- Prudent use of masks and social distancing - which lowers the risk for everyone
This change of behavior will allow economies, both local, national and global to begin to open - which will turn the tide of economic devastation and unemployment. This will lead to a smoothing of the dislocation in pricing of stocks and bonds and unleash the power of individuals to provide for and protect their families not only physically but economically as well. If you are an investor - do not try to time when financial markets recover or how this takes place. Stay invested and keep investing in a manner consistent with your personal goals.
My Plea: Whether it be public policy choices by elected officials or asset allocation decisions made by clients and their advisors, DATA should reign omnipotent as the driver of important decisions.