Matt believes it's impossible to know how an unprecedented economic shutdown will affect investors' portfolios in the short-term. The only thing investors can be certain of is that the stock market will not show long-term stability until the end appears to be in sight.
March 26, 2020
What started as a viral outbreak in a central Chinese province has turned into a global pandemic, grinding the world’s economy to a halt in the process. Investors have just experienced one of the most volatile, gut-wrenching rides shareholders have ever experienced in a single month.
Worst case scenario. The economic shutdown continues ad nauseam. Some reports claim this pandemic could continue in waves, extending for more than a year out. If this proves to be accurate, investors haven’t even begun to experience the real economic pain this pandemic could bring.
Best case scenario. The current shutdown extends 6-8 weeks and the crisis will be largely over. President Trump has already promised to cut red tape to see if existing drugs can be used to treat the virus, including Gilead Sciences’ (NASDAQ:GILD) remdesivir and malaria drugs hydroxychloroquine and chloroquine. Vaccines are already in the early stages of development (though this is a long and arduous process that will last over a year before being approved). If these treatments prove effective, as hospitals and medical centers are flooded with more tests and ventilators, the worst could be over before summer.
I don’t know what the future holds, but I believe that capitalism and human spirit will win the day, as they have so many times in the past. I just don’t know how long it will take. Unfortunately, however, that’s just a hunch and in life, as in investing, there are no guarantees. The market will not show long-term stability until the end appears to be in sight.
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