Most important, I (Chris) hope you and your family are doing well and staying healthy.
That’s your top priority – keeping you and your family safe.
According to the Johns Hopkins coronavirus resource, the virus has infected 41,500 Americans… that we know of.
That’s now more than Spain, Germany, France, and Iran. The only two countries with worse infection rates are Italy and China.
Schools are closed. Businesses are either closed or, like Legacy Research, have gone fully remote.
And local governments have ordered 70 million Americans to stay inside their homes.
The idea is to try to stem the spread of the virus so it doesn’t overwhelm frontline medical staff, as it has in Spain and Italy.
But don’t worry. Together, we’ll get through this.
As our tech expert, Jeff Brown, has been showing you in these pages, treatments and a vaccine are on the way.
And Palm Beach Research Group’s Teeka Tiwari showed here why stocks will hit new highs again in 18 months’ time.
But I’m not going to sugarcoat it for you. This is going to get worse before it gets better. So it’s critically important you understand what’s really going on.
That’s why today, we’ll survey the damage the virus has done to the economy and the stock market.
Then I’ll give you a simple three-step plan to stay safe and protect your wealth.
The Dow and the S&P 500 suffered their biggest weekly plunges since the 2008 global financial crisis.
And today, the sell-off continued…
The Dow fell another 3%. The S&P 500 dropped another 2.9%.
This brings the losses for the Dow to 37% since the index peaked on February 12. (A bear market is defined as a 20% or more drop from a peak.)
And it brings the losses for the S&P 500 to 34% since its peak on February 19.
These are steep, steep falls. But I can’t guarantee we’re at the bottom – yet.
Today, for instance, there were no humans on the floor of the New York Stock Exchange (NYSE) during trading hours.
That’s the first time this has happened in the 227-year history of the NYSE.
New York City is a coronavirus hotspot. So far, there are 12,000 confirmed cases there. So traders and market makers are working remotely in an effort to stem the outbreak.
This is no longer something they’re just watching unfold on their screens. It’s affecting them and their families.
It’s hard to know what effects this will have on investor sentiment.
You read that right…
Federal Reserve Bank of St. Louis president James Bullard says we’ll see an “unprecedented” drop of 50% in GDP in the current (March to June) quarter.
That’s steeper than anything we’ve seen before – including during the Great Depression.
Bullard also said the U.S. jobless rate may hit 30% this quarter. (The highest it’s ever been was 24.9% during the Great Depression.)
We still don’t have the exact data. But if Bullard is anywhere near right, those are insane numbers.
And here’s the thing about the outbreak that I believe most folks don’t yet fully grasp…
What’s happening isn’t like some extended snowstorm. It’s not like we all hunker down… then emerge in a couple of weeks when the snow melts.
The virus has spread all over America while we weren’t even looking for it.
The same thing is happening globally. The epidemiologists I’ve listened to say that if we end the lockdowns, the virus will surge again.
Then we’ll go back into lockdown… and it will die down.
Getting the “all clear” is going to be tough. One estimate by Imperial College London is that the lockdowns will last for 18 months.
And the economy is not set up for that kind of uncertainty.
As you’ll have read in the news, there are efforts to pass a stimulus package on the floor of the Senate. (More on that in future updates.)
But because of concerns over the spread of the virus on Capitol Hill, only 48 Republican… and 47 Democratic… senators are physically present for voting.
This comes after Senator Rand Paul of Kentucky tested positive for COVID-19 – the illness the coronavirus causes. Two members of the House of Representatives tested positive last week.
These are unprecedented times. It can be hard to think straight with so much news hitting from so many angles. But it’s vital that’s what you do now.
Step one – get safe and make sure your loved ones are safe.
Self-isolate if you can. If you can’t due to work, take the recommended precautions.
You’re not going to be able to put a financial plan together if you don’t feel safe first.
Step two – build up your cash position.
My apologies to readers who’ve heard me bang on about this before. But it’s another vital move you need to make now.
Cash will cushion the blow of further falls in stock prices. It will also give you the “ammo” you need to buy quality assets at bargain prices when the dust settles on the sell-off.
This way, you’ll be ready to pounce when the real bargains start to appear.
As bad as this all is, it’s going to create a rare opportunity to profit when the recovery begins.
It’s going to be a chance to make double-digit… and even triple-digit… returns on stocks that have been beaten down in price.
Just take a deep breath for now. As Teeka told his readers on Friday:
How we get there remains up for debate. But there’s no question we’ll overcome our present circumstances.
The sun will shine again on America and the rest of the world.
Remember, the world overcame World War I… the 1918 Spanish flu… World War II… and the Great Depression. Just like those past generations, we’ll triumph over this generation’s trials.
I’ll have more for you on what criteria to look for when putting together your watch list in future updates. I’ll also have more for you on how to know when to start to nibble again on stocks.
For the last week, I’ve been in a small cottage on a remote farm in my native Ireland.
Scenes from your editor’s life in lockdown in Ireland
I need to spend 14 days here without any social contact before I can see my parents. They’re in their mid-70s. So my priority is to make sure they’re safe.
And doctors say the incubation period for the virus might be that long. That means, even if I have no symptoms, I need to stay isolated for that long.
I got home from Spain on March 17. That means another eight days to go here in the Irish countryside…
If you want to reach out and say hello… or ask a question… or share a personal story about how you’re coping with lockdown… don’t be a stranger.
You can reach me and the rest of the Legacy team with your questions and stories at feedback@legacyresearch.com.
So start sending your questions and stories our way, especially if you’re a frontline healthcare worker. Write us at feedback@legacyresearch.com. And keep your eyes peeled for The Daily Cut AM in your mailbox each weekday.
Until tomorrow,
Chris Lowe
March 23, 2020
County Kilkenny, Ireland
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