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More coronavirus, bad headlines, and four dangerous words

By: Devan Robinson

“An investor who has all the answers doesn’t even understand all the questions.” - Sir John Templeton


More interesting Chinese data

The Chinese market hit a 52-week high last night - still an interesting piece of data.  China's stock market fell 11% from their highs during their Coronavirus outbreak and they are now nearly recovered.  Meanwhile the S&P 500 is still down 11%.  An interesting dichotomy.

China has also begun closing Coronavirus hospitals in Wuhan - the epicenter of the outbreak.  You always have to take Chinese data with a grain of salt but it is interesting nonetheless.

Lies, damned lies, and statistics

Dramatic headlines about the recent 1,000+ point moves in the Dow Jones Industrial Average have been spreading recently.   For example: "Dow falls 1,191 points - THE MOST IN HISTORY." 

While the headline is true...it's a bit alarmist.  I encourage investors to watch the percentages and not points.  As the Dow continues to grow from 24,000 to 25,000 to 26,000 and beyond the point moves will naturally be larger.  Percentages are much more relevant to your portfolio.

I've pulled some data to illustrate my point (Source: Standard and Poors).  Below are the ten largest single-day point declines in the history of the Dow Jones Industrial Average:

A lot of recent history!  That makes sense as the Dow index grows larger and larger.  There will come a day when 1,000 point swings are the norm and not the exception.

Now let's look at the largest percentage declines. I pulled the top twenty this time for good measure.

As you can see...not much recent history.  None of the largest point declines even crack the top twenty percentage declines.  History is always a better guide than headlines.  Thus far the recent daily moves are common for a market correction.

Four dangerous words

"The four most dangerous words in investing are 'this time it's different.'" - Sir John Templeton

I've been reflecting on Templeton's quote today (I don't know what that says about me?) 

Sir John Templeton was a legendary and timeless investor.  It's a wonderful quote because world events are, in fact, always different.  We've never dealt with the coronavirus and no one knows how the virus ends.  What I do know is that markets and capitalism will adapt and endure.  As Warren Buffet famously said in the interview below - "the United States has the secret sauce."


This too shall pass.

Thank you all for your kind words on my recent Coronavirus post.  I love my clients - more to come.

Devan

The foregoing content reflects the opinions of Fairlead Financial Group LLC and is subject to change. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct.

 Past performance may not be indicative of future results. Securities investing involves risk, including the potential for loss of principal. There is no assurance that any investment plan or strategy will be successful, or that markets will recover or react as they have in the past.