The financial market has experienced some severe ups and downs in 2020, thanks largely in part to the pandemic. In their first video market update, Josh Strouse and Charles (Chuck) Powell address some of the top questions/concerns their clients have asked.
Together they address how the various government stimulus programs have worked, what has been learned from times of market disruption and how to maintain a portfolio if the pandemic persists.
Transcript
Chuck: Hello everyone. This is Josh and Chuck coming to you from our main office here at the Woodward Building in downtown Mount Vernon. We’ve decided to make some videos and Josh, why don’t you tell everybody why we decided to make these videos.
Josh: To be quite honest I don’t want to make these videos, but we are doing this because we can’t communicate with our clients in the way that we have in the past because of COVID-19. We have a lot of clients that fit in that demographic that they really shouldn’t be out and about and so this is our way of communicating with them, communicating with the general public. Hopefully adding some information, additional information, our opinions on what’s happening in the markets, the economy and answering any questions that our clients have. Chuck and I were discussing what we wanted the content of this first video to be and Chuck, tell them what we came up with.
Chuck: Well, we decided to reach out to a handful of clients and just ask what their concerns were with the market and the economy and everything else that’s happening in their lives right now. Everybody’s lives have changed. Everything’s been disrupted because of COVID-19 and people have different concerns and we wanted to address them and ask some questions so we’re going to have some dialogue back and forth and ask each other questions and hopefully answer a lot of the questions that our clients had. They kind of overlapped. There’s a lot of similar feelings from a lot of the different clients so if your question didn’t get answered and you talked to us with a question then hopefully in the future in another video we will be able to answer it or we can always have a personal meeting and answer any of your questions. We have three questions and it’s very general because we can’t be very account specific in a video that’s based for everyone.
Josh: That’s right. Very good. First question. You’re up Chuck.
Chuck: Josh, how has the government stimulus various programs worked? Was it enough? Will these monies be paid back and how does this affect all of us?
Josh: I think that’s a great question because this is relatively new. We haven’t had a recession where the government just starts writing checks to everyone in a significant manner so as quickly as this whole COVID-19 thing blew up, the government reacted very quickly through personal checks to everyone and then also through the PPP program, the Paycheck Protection Program. I honestly think that it has worked so far, but it’s a little bit too early to tell definitively if it’s worked. The Paycheck Protection Program was a trillion plus dollars and funded more than one time. It did give businesses the opportunity to take a pause from their day-to-day and continue to pay their people and to feel like if they weren’t getting the amount of business in that they normally did that they were able to still pay their bills and pay their rent and pay their staff. But it was a bandaid. It was a temporary thing and my justification for it working so far is just look at the Dow. The Dow Industrial Index at the beginning of this year was at 27,000 in January and as it closed today we’re at 26,000. So despite all the pullbacks and the thousand point losses and that month or month-and-a-half of straight downward movement, the Dow got as low as 18,000. And now it’s back to 26,000. I don’t know that it’s sustainable to keep the Dow where it is.
I see a lot of volatility and a lot of issues coming up down the road but I think it’s very clear that it has helped and that’s the reason the Dow is where it is. But to answer the second part of your question, was it enough. I think it’s too early to tell and I think that in the next few months we’ll be able to see the true depth of this recession. And if this recession is as deep as I personally feel it is then we still have some more down before we’re going to go back up. But, we need to get a handle around a vaccine and some other care treatments before we’re going to know if this thing is in the rearview mirror and we’re not there yet. We still have some trying times ahead of us. Our economy wasn’t created to be shut down so the last part of the question is how does this affect us? Our economy wasn’t created to be shut down so when it gets shut down it’s hard to restart. It’s going to take time to restart it and I think this does affect everybody even if it’s not directly, indirectly it does. There’s a lot of essential workers. At the beginning of all this I didn’t even know what essential versus nonessential was, but now that’s a talking point that is commonplace and who would think that the person who cuts your hair is a nonessential worker, but apparently that was deemed the case. There are several industries that also fell into this category and because of that we have had to adjust and we’ve had to change the way that we do business and change the way we live our lives. At the end of this I think that we will be stronger and better and I think we’ll use technology more and I think that if this does happen again, which I hope that it doesn’t, but who knows what happens in the future that we’ll be more equipped to handle it because we’ve gone through it one time. Hopefully, we come out stronger this time and we’re better prepared for the next time. That kind of leads into our second question which is, and Chuck I’m going to ask this to you. In times of market disruption what have we learned? What have we done? Would we have done anything different looking back? And how can we use this information to prepare for the next time it happens?
Chuck: So that was a great question Josh, and I think that it makes me think about a lot of different things. And back to what we based this video on, we have these slogans that we keep on our wall here in the office and they’re very great slogans. They were relevant 20 years ago and they’re relevant today and they’ll be relevant 20 years from now. And that’s why we really like the sayings and we read them and we really take them true to heart. What it makes me think about is do something today your future self will thank you for.
What we learned in this downturn is that people make mistakes. I mean people get emotional when it comes to market investing and at volatile times and volatility people tend to be emotional based and pull out of the market when they shouldn’t, when the market goes down. They buy in at the wrong times because their fear of missing out and they want to get back in the markets when it’s climbing back up. The next thing you know something happens and it pulls back. As advisors this is one of our biggest strengths in working with clients in that we can help take the emotion out of your decisions. So as long as we stick to our plans and our goals and continue to do what we need to do then we should be fine. That’s why we built the goals. That’s why we stick to the goals. We’re going to see many recessions in most clients’ careers that we work with. Back to the recessions in the past that we’ve seen in 2001 in the tech bubble burst and then in 2008 we had the housing and the financial market and the banks crashing. Now in this recent recession in 2020 we’ve seen nonessential retail like Josh said earlier, we didn’t even know what nonessential was. I’m pretty sure that Lowe’s and Kroeger and Walmart are having their best year ever. Amazon and Apple were both up. Tech stocks are crushing it with record highs. Energy and travel have been, oil stocks were as low as I’ve ever seen them. Travel with airlines getting crushed and shutting down. All this has effected and it creates opportunities. It creates opportunities to buy in at the right times and if you’re smart about it and we continue to stick with the plan that we created.
Josh: You know what it reminds me of – Warren Buffett is always quoted as saying, “Be fearful when people are greedy and greedy when people are fearful.”
Chuck: Absolutely.
Josh: And this has created an awesome opportunity if you had the courage to be able to pull the trigger on some of the cruise lines and the airlines when they were very low. We did have some clients that did that. We don’t normally recommend that type of aggressive investing but there are certain times when it calls for it and we definitely have had many conversations with many clients about it.
Chuck: Back to the original question of what have we learned going toward the future. We’re going to see another recession at some point in our careers and our clients’ careers in their financial lives. We’re going to see multiple recessions and downturns and we have to be smart. We have to stay strategic in what we do and stick to our plans and our goals which leads us to another sign that we keep on our wall. It’s a very great sign and it says, “If the plan doesn’t work, change the plan but never the goal.” The goal is always going to be the same - to help people retire comfortably and to work with them to make sure they can accomplish whatever goals they have in retirement.
Josh: This leads right into our third question.
Chuck: And it leads into the third question which I’m going to ask Josh and that is if the epidemic persists, how do we maintain our portfolios and should we let the current world influence our investment strategy? Ultimately will we be on track for retirement as planned?
Josh: This is a great question because I think it speaks to the current situation not only with the market volatility but then how does it relate to the plan just like what our wall art says and one other piece of wall art that we have says, “A smooth sea never made a skilled sailor.” We live in a lake community so it hits home with the smooth sea representation there. If the markets only went up our job would be easy.
Chuck: We’d be irrelevant.
Josh: Yes, but they don’t. And life throws you curve balls and you’ve got to figure out how to make it work and you certainly don’t want to make emotional decisions, especially financial decisions. So, to answer this question I think the epidemic is still happening and we’re going to see a lot more spikes. The spikes just last week popped up and the market was down 1,800 points. People are still scared as they should be. Again, we don’t have a vaccine, we don’t have a treatment that really works for this other than to stay at home and stay away from it. That being said we’re going to see more volatility and more opportunities. We do need to stay the course in some respects. One of our other clients asked the question of what do we do when the markets change, when they go down? How do we make the decision of getting in and out of the markets. We have an investment committee that I’m a part of and there’s six of us on this committee. The chief economist in our committee runs an algorithm. He’s a techie and there’s a bunch of different inputs that go into this algorithm and this algorithm spits out a recommendation. Our committee researches and looks over the recommendation and then we put our own thoughts on it. There’s a wealth of experience there. I’m one of the youngest advisors in the whole committee and we say does this make sense. Is this what we want our clients to do. Based on that we implement the strategy. And the strategy did call for us getting out of the markets for a period of time and we avoided a whole bunch of downturn. Ironically as the markets came back up our economic indicator said that we shouldn’t be back in the markets because nothing has really changed. The only thing that changed was the fact that the government was pumping in a whole bunch of money and it was propping things up. So, with that we did decide to get back in the markets a little bit just a couple of weeks ago and I think that was the right move at the right time. We still have a lot more we can get back in with and we will when the timing makes sense. As for right now we’re one foot in the deep end and one foot out so that we can go either way depending on which directions the market goes. One thing that I think is important to keep in mind is how we do our business and that is we charge our clients a management fee and this management fee is typically around one percent depending on the client’s situation. And with that we are similarly invested to our clients in that we want the markets to go up. If they go up then we earn more money, the client’s accounts grow and it’s a win-win for everybody. If the markets go down we earn less money, the clients have less in their accounts and we lose. So, our goal is always to grow our clients’ accounts and we love this model because it puts us on the same side of the fence. We do place a lot of trades in our clients’ accounts. Our clients don’t get charged for these trades so that’s part of our management service is that we are actively managing your portfolio. Some clients are custom models where we have individual stocks. Some clients are in our models so we set that up on the front end so that we know what a client is looking for and can address their needs and their goals specifically to their situation. That answers all the questions that we had for today. We want to thank everybody for joining us. This is something new and we’re hoping the information is relevant and that it answers some of the questions that you may have. We hope that you share this video with friends, family, coworkers, whoever that might have similar questions. We hope that we can be of assistance to you not only today but in the future. We are truly blessed to work in this industry and to have clients that trust us with their savings. We don’t take it for granted and we work very hard and diligently to help our clients accomplish their goals. We are confident that the goal-based financial planning that we do helps them accomplish their goals. In the future we plan to talk about some different topics, market updates and things of that nature so we hope that you’re able to tune in. That’s all. Do you have anything else Chuck?
Chuck: Absolutely. In conclusion I’d like to thank everybody as well and just say if there are any questions we didn’t cover or something you’d like to see us cover in a future video as content, please reach out to Josh or myself. Send us an email or give us a phone call and let us know. We would be happy to cover any videos that anybody would like. Like Josh said, feel free to share this with anybody you know that may have these similar questions or may need to talk to somebody. Things have changed a lot. A lot of people have lost their positions at their work and may need some advice on how to move forward. We’d be happy to sit down with anybody and talk to them about their situation and hopefully we can give them some advice and help them. Once again, I’d just like to say thank you to everybody who trusts us to help them with their money and we’ll look forward to talking to you again in the future. Thank you.
Josh: Thanks.