They say March comes in like a lion and out like a lamb. That seems to be the case as markets were up last week and starting this week after a dramatic freefall for the prior three. We are beginning to come to terms with being at home for a while as we shelter in place for the month of April. I see this as a good sign as we are now being realistic about what we are dealing with.
I’ve been through five market selloffs in my lifetime. Three as an investment professional, and none of them have been this abrupt.
If you checked into your account this month, you noticed that it wasn’t just your stocks that were down but your bonds too. Even gold, considered a safe-haven asset, took a steep drop. Why did safe-haven assets tumble? In a word, it is leverage. Any fund or investment that borrowed money against investable assets faced the deterioration of those assets and likely faced margin calls. Many holders of mortgage back securities faced margin calls they were unable to meet, forcing them to sell. But before that, these institutional investors sold treasuries to avoid the margin calls.
This forced a selloff in Treasuries and a cascade of selling of all investable assets.
So how does this affect you? Stock and bond prices have been recovering, but volatility is here to stay. You’ve probably heard some version of the market hates uncertainty, and there is much uncertainty out there. How will this affect the economy? How long will it take to get back to normal? Will we be back to work by this summer? The fall? What is the long-term economic impact on our economy? Because there are so many unknowns, there is likely to be volatility in the markets for a while. And…brace yourself…we may not have hit bottom. I doubt we have. If I am wrong excellent, if I am right, there will be another leg down in the market.
We can either view this as an opportunity or a crisis. If you have time before you will need assets you have targeted for retirement, it is an opportunity. You have the chance to buy assets at discounted prices. The opportunity is especially true if you have a retirement plan at work, and you can continue contributing. The weekly or monthly contributions you make to retirement plans are buying low. If you do need access to funds now, you are going to want to take steps to sell assets and free up cash. Selling can be an especially tough call, as these assets may be below what you paid for them. If you think you may need access to your investment accounts to make it through the next three months, give us a call now or send us an email, we will set up a time to talk. We can help you work out a strategy. Here is a couple of things you can do as well:
- Review your bank and credit card statements from the last few months
- Separate fixed expenses, like mortgage, rent, utilities, etc.,
- Identify those that are discretionary,
- Look at any discretionary expenses and cut them if possible,
- If you have a lot of monthly subscriptions charged to a credit card, you may want to have the credit card company reissue the cards and eliminate recurring charges so you can look at each expense and see if it is vital.
- Call your finance companies, especially car loans, and ask for a deferment. Many car loan companies will let you skip a month and tack that month on the back of the loan,
- If you have student loans and money, is tight, get a deferment. You can usually defer student loans for as much as six months just by going online and answering a few simple questions,
- If you rent and are unable to pay this month or next, contact your landlord immediately and work something out, and
If you have a mortgage and are unable to pay, contact your mortgage company immediately.
- You may, and I emphasize may be able to get a deferment from your home mortgage. This situation is evolving rapidly, and if we have more news on the subject we will get a newsletter out quickly
These are just a few ideas. Everyone’s situation is different. If you need assistance please contact us. We’re here for you. If you know someone who is suffering and could use some help, feel free to send them this newsletter or any of our past issues. Past issues are available here. https://www.hicokfinancial.com/blog/
Know that I appreciate you and the trust you place in my firm and myself. You mean a great deal to me, and I am happy to assist in any way I can.
Please let me know how I can help.
David
Here are some of the books and resources we have recommended recently. If you have a resource you want to share, please let us know.
We’ll get it out there in the next issue.
Tapping into Wealth, Margaret Lynch
Discover Your Purpose, Rhys Thomas
Thinking Fast and Slow, Daniel Kahneman
You are a Badass at Making Money, Jen Sincero
I Will Teach You to be Rich, Ramit Sethi
The Science of Getting Rich, Wallace Wattles
Your Money or Your Life, Vicki Robin
The links provided are for educational purposes only. The links do not represent an endorsement by either Hicok Financial Solutions or ProCore Advisors, LLC.
