Black Thursday 2020 and a Trip Down Memory Lane
Dear Valued Clients and Friends,
The market’s painful bloodbath of selling hit another level today, with the S&P 500 ending in a technical bear market for the first time since the financial crisis (over 20% decline on a closing basis). On the calendar year, the Dow is now down 23% and the S&P down 25%. We closed at the lows of the day, indicating no buying demand at the end of the day, and of course, heavy ETF ownership likely exacerbated that late-day selling. Today was the worst percentage drop in the market since Black Monday of 1987, and of course, it comes off of two other brutal days this week and just a horrific few weeks behind us.
I would utter the perfect words right now in a second if I could. I do not blame any clients for wanting to hear them. But there are no perfect words, in the sense that the violence and rapidity of this drop have left the whole country shell-shocked, and certainly market investors. Do I believe markets are going to recover? With every ounce of breath in my body? Do I believe we will get on the other side of this and feel categorically different than we do now? Yes, I most certainly do. Am I comfortable to be buying in this market, where the investor has the appropriate risk appetite for such? Yes, yes, and yes.
And yet, do I share the feeling of many that this uncertainty is gnawing, uncomfortable, and simply not going away any time soon? I do. What will it take for markets to turn? For the selling to just get exhausted, and for the market to no longer reply to ongoing headlines (for the headlines will continue, and yet the market will stop replying – at some point – when such adequate pricing in is done). I will explain more in a moment.
I walked to my office this morning in New York City using Times Square as the avenue to go down (from 63rd Street en route to 44th Street). It was very, very early in the morning. As I got past 53rd Street I looked to my left and took this picture:
It is a Sheraton Hotel in Times Square. But in 2001, it was the site Lehman Brothers took as their post-9/11 office space when their prior space went down at the Trade Center.
I walked a few more blocks and took another picture:
It says Barclays now, but in 2008 it is where Lehman Brothers was located. I walked by this building a thousand times in 2008 during the depths of the financial crisis. I remember it like it was yesterday.
In just a few minutes this morning, I had a physical reminder, literally a few blocks from one another, of two of the most painful market events in history, both of which I experienced in a real and profound way. It has come upon us as black swan events do – those events we cannot see or expect, but bring incredible volatility, selling, economic distress, and tension.
9/11 and the financial crisis and now this coronavirus event are three different events, with three different sets of particular conditions. The markets recovered from 9/11, and they recovered after the financial crisis, and odds are they will recover from what we are going through now. In the other cases memorialized by the buildings I walked by today, it took months, not days or weeks. And I believe that will be true here. I am desperately afraid of clients missing 30-50% of the inevitable recovery by making the mistake of trying to time their way out and time their way back in.
I will say more in Dividend Cafe tomorrow – extensively more – the longest Dividend Cafe I have ever done – about everything going on.
But for tonight, I ask you to trust me and your team at The Bahnsen Group. This will pass. And like the Sheraton building and Barclays building on Seventh Avenue, you and your financial goals will still be standing. It is to that end that I work, and that every one of the fine people at The Bahnsen Group works. We will vigorously work for your protection and success all the way through. We will never forget the lessons of 9/11 and the financial crisis. And we will talk to you every day, in any way, to instill in you the confidence necessary that everything will be fine.
Because it will be. No matter how this feels right now. Everything will be fine.
David L. Bahnsen
Chief Investment Officer, Managing Partner