Last week, the markets experienced an eyebrow raising pullback due to concerns that the COVID Delta Variant could compromise the economic recovery effort. As should be expected, any troubling COVID headlines tend to bring forth flashbacks of shuttered economies and sheltering-at-home. With that said, we feel it is important to note that the conditions we face today are notably different from last year. In contrast to the past, the more vulnerable segments of the population have been vaccinated, covid therapeutics have shown success in mitigating the severity of those infected and vaccinated persons appear to have a lower risk for severe outcomes. With these factors to our benefit, we have not seen the same link between the rise in cases and the rise in hospitalizations. This is good news and an important distinction from the past. The chart below tracks cases and hospitalizations in the UK which has been contending with the Delta variant since May. Similar trends exist for Israel and India and so it seems reasonable to hope that delta’s impact on North America will follow suit.

With this background, countries with high vaccination rates like the U.S. and UK, have not responded with a shut-down of their economies. Despite the rise in cases, the UK continued on its path to removing COVID restrictions including indoor capacity limits and social distancing requirements.  The solution of lockdowns appears to have been replaced with a wider public policy of encouraging citizens to get vaccinated. This new approach likely reflects the lack of appetite for lockdowns by both consumers, businesses, and governments. Although no one can definitively say that lockdowns are completely off the table, investors should acknowledge what appears to be the preference to keep economies open. Ultimately, this bodes well for corporate earnings and investors.

At the time of this writing, the delta-induced market selloff, seems to have quickly reversed. Although investors are cheering for a speedy recovery, we note that the US has already reported nearly 60,000 cases and may be trending towards 100,000 cases within a couple of weeks. Should the US track at the same pace as the UK, we could see a case count of 200,000. Needless to say, those types of headlines will be hard to ignore and could inspire another bout of volatility.

Investing amidst COVID has been difficult however it has also reminded us of some longstanding investing principles. When followed they can help investors keep an even keel during the most volatile times. Below are two which we hold dear.

A crisis poses danger to a portfolio, but it may also present an opportunity.

Investing according to one’s time horizon is important. Those with the ability to invest long term have historically been rewarded. Below, one can see the number of crises that investors experienced in the last twenty years which in hindsight were great buying opportunities.

“It is not timing the market, but time in the market that matters”.

 This point was punctuated with last year’s market performance. If an investor purchased the S&P 500 Index on February 1, 2020 and held it through the market crash in March, their return was still 17% a year later.  Longer term technical charts can put market volatility into perspective. In the chart below, it appears the market is still in a healthy long term trend. Any pullback from the upper end of this 12-year cycle (red line) could be interpreted as a healthy step backwards before targeting new highs.

For those without the ability to take a longer term approach, portfolio diversification will always provide a degree of risk management. For many investors, trading in and out of the markets based on headline news is tempting, but it has also proven difficult. Working with a licensed advisor or portfolio manager can help you put market events into perspective and to assist in making the necessary portfolio adjustments.