Something New, Something Old

Does the novel coronavirus make this time different?

By David Feinman

Economists like to say that the four most dangerous words in the English language are “this time is different.” By this they mean that history shows us how recurring cycles of growth and contraction, including bear markets, are neither unusual nor unexpected. Yet common sense tells us that this time is indeed different in terms of the magnitude, speed, and concerted global impact of two separate but related crises -- one attacking public health and the other threatening worldwide economic activity. Clearly, the world is in the midst of unprecedented disruption. The global economy has been almost entirely halted, intentionally, in an effort to mitigate transmission of the novel coronavirus and slow the onset of the disease, COVID-19.

The internet and the media have opened a fire hose of information. The news cycle is mercurial, alternating between predictions of ultimate disaster and genuine reasons for hopefulness. And yet, even in the face of proliferating epidemiological data, financial models, and expert opinions, it is easy to feel uninformed and overwhelmed.

At Silverlake, we believe that while the current narrative is original in the details, certain important themes are reiterative. The world has been challenged many times throughout history by disease, war, economic stress, and political upheaval. Thanks to our collective ingenuity, courage, and determination to survive, we have come through them all -- stronger than ever. In a previous post we looked at how markets have behaved historically, recovering from crashes and bear downturns. A more in-depth look appears on our website.

Many have asked if now is a good time to buy stocks, given the recent precipitous decline of world equity markets. While we all love a bargain, it is impossible to know in advance whether markets have bottomed. Markets are driven by news and as we have seen during the past month, the news is completely unpredictable. The failure of most active portfolio managers to outperform the broader indices by timing the market has been documented extensively in the academic financial literature. A high level look can be found on our website.

At Silverlake, we don’t try to time the market or guess its direction in the short term. Our approach is to create an investment plan that is tailored to your individual financial goals and risk capacity, and then rebalance your holdings as needed, incrementally, over time. Our discipline emphasizes broad diversification through total world capital market exposure. This approach has been successful at helping investors meet their financial goals in the long term. We are mindful that the proliferation of COVID-19 is an urgent public health issue with negative consequences for the world economy. But we remain true to our investment philosophy: over time, capital markets have rewarded patient and disciplined investors with performance that compensates them for the risks.

These are difficult times and many people are suffering, but we have each other. By pulling together, the greater global family can endure the inestimable human and economic costs of COVID-19. In Los Angeles, the homeless are especially vulnerable. Silverlake helps out by contributing to charities that provide food and shelter for this at-risk population. Every one of us can help in some way and together we will make it through the current crisis. The coronavirus may be truly novel but our capacity to love and support each other is timeless.

The content provided in this document is for informational purposes only, and should not be construed as legal, tax, investment, financial, or other advice. Nothing contained in this document constitutes a solicitation, recommendation, endorsement, or offer by Silverlake Portfolio Advisors or any third party service provider to buy or sell any securities or other financial instruments. All expressions of opinion are subject to change. Investors should talk to their financial advisor prior to making any investment decision.

Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results. Diversification does not eliminate the risk of market loss.

There is no guarantee investment strategies will be successful. Investing involves risks, including possible loss of principal.