Uncertainty

I hope that you and those close to you have been able to maintain good health and balance during this confusing time of Covid-19. In recent weeks, we have been inundated with a frustratingly diverse range of expert models and projections of how the Coronavirus is expected to run its course. Federal, State, and local governments have attempted to set road maps for us by laying out plans, setting dates, giving orders, and making recommendations. As new information comes in, these plans are modified, dates are re-set, orders are rescinded – changes that lead us to feel an even greater sense of uncertainty.


Uncertainty is uncomfortable. Perhaps that is why so many readers chuckled at the presumptuous tone of the twitter poster who wrote: “Americans need to know date certain this will end. The uncertainty for businesses, parents and kids is just not sustainable.” We can recognize and laugh at our own discomfort in this person’s foolhardy attempt to control the unknown.


It is hard to laugh about the future of the economy, which raises more questions for which there are no immediate answers. We can be sure that unemployment and financial stress will continue to rise, but for how long? How far will corporate profits decline? How long will the recession last? The Government is providing support, but will it be enough?


The financial markets are reflecting all these concerns. How low will the stock market go? Where is the bottom? How low will interest rates fall? When will I earn a fair rate of return on my bond portfolio? More uncertainty.


Despite the undeniable fact that uncertainty abounds right now, historical trends offer key insights and a sense of stability. I am hearing worries that, “This is different from anything we have experienced before. Very Scary.”


No, the uncertainty is not different, at least regarding the financial markets. During my long career, I have witnessed a wide variety of anxiety-provoking events cause market corrections. Each time the concern has been that the economy would fall into the abyss. Each time, the uncertainty has dissipated, the future has gained clarity, and markets have recovered.


Today, The Federal Reserve is determined to keep interest rates near zero to provide economic stimulus. Soon, money market yields will be close to zero. Eventually the generous dividend yields on stocks should attract investors seeking a return on their capital and lead to a market recovery.


Uncertainty is no joke. It is uncomfortable, and, on the upside, it creates opportunity.