Combatting Investment Anxiety and the Coronavirus Blues

Just last month, we were marveling at how quickly the coronavirus had arisen. As we continue to reflect on unfolding news, it now somehow feels as if COVID-19 has been a part of our lives forever. There’s even a well-known behavioral bias for this. It’s called recency.
 
As an advisor, one of my greatest roles is to help investors combat recency, and replace it with a longer, clearer view. This means ensuring you have a plan in place. It means maintaining a source for dependable income for any hard times to come. It means stress-testing your plans as realistically as possible before the next bear market roars to life.
 
When the inevitable bears arrive, as they periodically do, we want to eliminate the usual anxieties. We can then make the best of it by rebalancing back to plan, harvesting appropriate tax losses, seeking opportunities for Roth IRA conversions, and otherwise staying the course.

In the meantime, the popular press and social media will continue to do what they do, which is to feed the frenzy. After all, big, bad news sells better than, “Remain calm; all is well.” 

Try to tune out and turn off your electronic devices. Go for a walk; take this time to enjoy being with your family. To help, here’s a fresh perspective you can discuss with one another:

What if the COVID-19 pandemic is more than just an unmitigated disaster? 
What if it’s also an important, if incredibly challenging opportunity?

How so? Consider these powerful words from the late Hans Rosling (emphasis ours):

Think of the world as a premature baby in an incubator. The baby’s health status is extremely bad and her breathing, heart rate, and other important signs are tracked constantly so that changes for better or worse can quickly be seen. After a week, she is getting a lot better. On all the main measures, she is improving, but she still has to stay in the incubator because her health is still critical. Does it make sense to say that the infant’s situation is improving? Yes. Absolutely. Does it make sense to say it is bad? Yes, absolutely. Does saying “things are improving” imply that everything is fine, and we should all relax and not worry? No, not at all. Is it helpful to have to choose between bad and improving? Definitely not. It’s both. It’s both bad and better. Better, and bad, at the same time. That is how we must think about the current state of the world.

That was a long quote, but worth sharing. Rosling was a physician, educator, and World Health Organization advisor who specialized in international health. He wrote this passage in his book Factfulness – while he himself was dying of cancer. So, clearly, viewing the world as “better and bad” was of utmost importance to him. 

As awful and enormous as the COVID-19 pandemic has quickly become, it seems highly likely we will ultimately prevail. It may not be obvious while we’re in the thick of it, but right before our eyes, our amazing race is making miracles happen. 

And we’ve only begun. After we’ve prevailed, think of all the other things we’ll have learned:
• Companies will have made major, if painful advances in their rapid mobilization procedures. 
• Governments will have discovered ways to more efficiently implement life-saving civic policies. 
• Healthcare facilities will have thoroughly field-tested their disaster protocols. 

Not only are these advances admirable in their own rights, they should translate into continued market growth for those who have faith in the future of commercial enterprise. 

No doubt, mistakes will be made; some will be bad ones. But – both bad and better – we will probably have learned far more than we will have lost. Society will be better prepared for a next global crisis. Markets will likely come out blinking, and then could well recover with the same speed at which they stumbled. We’ll have discovered how quickly we can still come together in unimaginable ways to protect our collective future.

Together, let’s keep focusing on how to make the best of things. But first, go take that nice walk.