Senseless murders. A pandemic flu that kills 100,000 Americans. Space missions. Rioting in the streets.
I am writing, of course, about 1968.
Five months into 2020, there have been comparisons made to that year, which Smithsonian called “the year that shattered America.”
“Movements that had been building along the primary fault lines of the 1960s – the Vietnam War, the Cold War, civil rights, human rights, youth culture – exploded with force in 1968. The aftershocks registered both in America and abroad for decades afterward."
Both the Reverend Martin Luther King Jr. and Bobby Kennedy were assassinated in 1968, a mere two months apart. Other tumultuous events of that American year included the Tet Offensive in Vietnam, deadly student protests against the war, race riots and draft card burnings.
Incredibly, 1968 also had a flu pandemic – the H3N2 – that killed 4,000 Canadians, 100,000 Americans and more than 1,000,000 people worldwide.
There is no question that 52 years later, America again finds itself in crisis, as does, to a lesser but substantial degree, Canada.
The tragic killing of George Floyd and the resulting mass violence across the United States are deeply unsettling on many levels. We can hope that compassion, a yearning to understand and positive change will prevail. And we can take some optimism from the fact that 1968 in America did contain glimmers of hope.
As The Atlantic puts it, there was chaos, “But some lessons were being learned and some progress was being made. This was also the year that NASA first sent astronauts around the moon and back,” which some may see as a parallel to Elon Musk’s SpaceX program becoming the first private company to send humans to the International Space Station, this very week.
On Earth in Canada, the pandemic continues to negatively affect our lives and economy in many ways. However, we can take heart in the fact that on both sides of the border, we have social and economic systems with tremendous resilience. This too shall pass.
THE MARKET
Looking to the market, I see further parallels between 1968 and 2020. In 1968, the market fell 9% between January and March but rallied and delivered a double-digit return on the year. In other words, there was a disconnect between political events and market performance: the former were much worse than the latter.
In 2020, this disconnect is also apparent. The market dropped 36% between January and March, has since then recovered considerably, and even though it is still down by double digits, I expect it to finish the year on a positive note.
This is not because the market is completely uncaring, but because one of its essential features is that it typically looks to the future. It is not looking to the economic impact of what is happening now, but instead at what companies are projected to earn in 2021 and 2022. This is a sign of the market functioning properly.
STAYING THE COURSE
So we are not making any changes to our strategy. We are still being very cautious and conservative, in a position to actually capitalize on future drops in the market, which cause some attractive assets to be underpriced – allowing us to buy them at a discount.
In the United States, we should note that mass protests have brought large gatherings of people into close quarters over considerable time periods, creating conditions for COVID-19 transmission. So there is concern among the experts that a new wave of cases may be coming, which could effectively undo many weeks of lockdown and physical distancing, which would be very unfortunate, and could trigger another selloff.
WE DO NOT OWN THE MARKET
I am sure you will recall that although I have referred a number of times above to the market, we do not own it. Instead, our portfolios have been custom-designed for you, driven by your financial plan. In other words, your portfolios are not the market, and thus are not as risky as the market – and so they continue to outperform it.
BIDEN BOOST?
An ABC News/Washington Post poll released May 31st shows Joe Biden with a 10-point lead, 53% to 43%, over Donald Trump. This is up from 49% to 47% in the same poll done two months previous.
Although the market seems to favour Trump only slightly more than Biden, it may start to envision a Democratic sweep, which could be significantly more negative for the market than a Trump victory. You may recall, as mentioned in the March edition of Marche Monthly, the market selloff after Trump’s 2016 win – and then the rebound that followed. This is further evidence of the disconnect between politics and the market, and simply reinforces that the best approach to generating above-average returns is to focus on owning high-quality businesses, which is a pillar of our strategy.
ALWAYS HERE
In recent issues of Marche Monthly, I have shared that many of you have expressed concern for the finances of your friends, family members and colleagues, and in some cases the institutions and foundations they are involved with. I continue to speak with a number of people you have referred to me, and we have had many constructive conversations and positive outcomes.
Please know that my team and I are always here to speak to anyone and provide a second opinion in complete confidence and with no obligation. Thank you very much again, and take care.
We don’t speak jargon. We’re all about uncomplicating your life, so we speak plain English. If there is someone you care about – someone who would appreciate this simple and straightforward approach – please feel free to share this message with them or put us in touch.
Want to discuss any aspect of this month’s blog, or any other issue on your mind? Have a story idea? I am always happy to receive your call or email.
Tyler Marche, MBA, CFP, FCSI
Your life, uncomplicated
tyler.marche@rbc.com
1-416-974-4810
www.tylermarche.com