"When the facts change, I change my mind. What do you do Sir?" - Keynes
After a challenging week, which saw around 10% wiped from equity markets around the world, last night we saw a rally in many markets including the Dow Jones, which closed almost 1,294 points, or 5.1% higher. Not just the largest points gain in history but, more significantly, the highest percentage gain since March 2009. Have you noticed it really is all about the context?
So, while many of our clients are incredibly busy digesting, planning and preparing Australia's medical response, and the rest of us are busy emptying the shelves at Woolworths and Coles, after a difficult week, can we breathe a collective sigh of relief when thinking about our investments?
Unfortunately, I think we all realise the facts remain unclear and conjecture and emotion still fills the void in terms of the likely economic response of our governments and the final effect on earnings and growth.
Although the headlines this morning will likely appear much more positive, their main purpose will still be selling newspapers and regrettably informed by conjecture and emotion.
A "dead-cat bounce" is the term often given to what appears like the beginning of an upward reversal pattern that fails to continue and, eventually, returns to a downward trend that surpasses the previous low. I'll leave it you to decide if we're now viewing this event in the rear-view mirror or if we're merely at the end of Act 1 with more volatility to come.
As usual, it's been entertaining to read the advice of "expert" commentators. Among the loudest voices we've heard that it's a good time to "steer clear of stocks", or perhaps "a good time to buy", and, my personal favourite, "add to your portfolio, selectively", which I imagine translates into, "abandon your previous portfolio established on sound asset allocation and diversification principals and instead try a bit of opportunistic trading".
Personally, if you have a sound financial plan in place I think it's a very good time to do absolutely nothing but spare a thought for our infectious disease, emergency and other specialists who will likely be at the sharp end of this.
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