Peace of Mind When it Matters Most

Paul FennerPersonal Finance

Sleeping bear sand dunes - peace of mind - Peace of Mind When it Matters Most | Tamma Capital

Last week stock markets were in rally mode as the $2 Trillion stimulus bill was passed, and President Trump indicated that some businesses could be up and running by Easter.

Trading in the stock markets last week took the stance as if the War against the coronavirus will soon be over.  How do we know?  Below are a few of the best-performing stocks

  • Norwegian Cruise Lines is up +94.50%,
  • Royal Caribbean Cruises +78.12%,
  • Boeing +67.07%,
  • United Continental is up +49.39.

These gains are in just three trading days!

This is signaling that the stock market is expecting people to be soon able to get out of their homes, get on a plane, go out to dinner, and book a cruise for a vacation again.

If you believe the economy will be re-opening back up soon, buy stocks now.

However, if shutdowns persist into May and June, stock prices will need to re-set even lower to reflect even more lost growth.

Within the past 24 hours, the President’s goal to re-open businesses by Easter has proven to be too optimistic as social distancing curbs have been extended through the end of April.

The truth is the stock market wants businesses to go back to normal.  However, we have no idea how much longer the virus will need to run its course and, secondarily, what impacts it will have on the economy and, more specifically, corporate earnings.

During this market sell-off, many commentators said, “earnings don’t matter.” That is wrong.  The truth is earnings always matter. It is just sometimes we do not have clarity on future earnings.

Initially, the stock market was selling off first because of being overvalued, then they sold off because shutting down business crushes future earnings.

Stocks may have to go lower to reflect this drop in growth and extended shutdown period.

However, if the coronavirus infection rate curve can be flattened, panic and fear should subside and return the economy to normalcy.  Stocks will begin to rise BEFORE the curve flattens. The problem is there could be some false starts along the way.

Our strategy throughout this correction has been to focus on companies that we want to own long-term based upon the following criteria;

  • Strong balance sheets meaning – low or manageable debt levels
  • Strong cash flow
  • Products and services that people will continue to use post Coronavirus

Since we are dealing with so many unknowns, tactically, we have raised our portfolio’s level of cash but have also made purchases in small amounts.  Now is not the time to place large bets on the direction of the virus or corporate earnings.

While current portfolio balances are in flux, now is the time to review your wealth management plan and ensure that you are taking the proper steps to confirm your plan’s probability of success. Now is the time when careful and thoughtful planning can be extremely valuable to your long-term plan.

I am here to help and support families in any way that I can.  And if you are not a part of the TAMMA family, I encourage you to discover what so many families have found to a partnership in both personal and financial planning that helps to create peace of mind.