Reassurance from the Fisher Dugmore Team

Who are you talking to about COVID19?
February 3, 2020
What personalities have been coming out of the woodwork?
June 1, 2020

We felt it important to connect with you again at this time to reassure you and highlight the importance of remaining calm, even though it may seem counter intuitive at the moment.

“Anxiety is defined as the subjectively unpleasant feelings of dread over anticipated events”

Does this sound familiar to you in light of the current Corona Crisis? Anxiety or fear triggers the reaction of fight, flight or freeze in our minds, and robs us of the ability to make sound decisions.

Psychologists believe that our fear of loosing something that we already own, can be further exacerbated by something that is known as loss aversion. Loss aversion is the idea that losses have a far greater psychological impact than gains of the same size.

The question we are all asking ourselves is, “What should we do”?

Investors have not experienced the unique challenges of a Bear Market, in excess of a decade. For countless millennials (and younger) this is a brand new phenomenon.

One hundred and fifty years of researched market history teaches us – DON’T PANIC!! Bear markets can be painful, but they are temporary. “This too shall pass…”.

In a research report, Goldman Sachs Analysts break bear markets down into three different types: Structural, Cyclical and Event Driven.

Structural Bear Markets have been triggered by structural imbalances and financial “bubbles” – think Global Financial Crisis (2007-2008).

Cyclical Bear Markets have occurred at the end of business cycles. They happen as a result of rising interest rates or falling business profits.

Event Driven Bear Markets have been triggered by once-off shocks to the economy, such as wars or oil price crashes.

We find ourselves in an Event Driven Bear Market, and the good news from a financial perspective, is that of the three types, Event Driven Bear Markets have been less severe than structural & cyclical downturns. Not only have declines been less painful, but they haven’t lasted as long and recovery times have been shorter.

This view is supported by the consensus of 1500 companies, during a Goldman Sachs investee call this week. “There will be economic damage from the virus itself, but the real damage is driven mostly by market psychology. Viruses have been with us forever. Stock markets should fully recover by the second half of the year”.

As difficult as it may be, now is the time to desensitise yourself to the inevitability of market fluctuations and remain invested to achieve your investment goals. These peaks and troughs, as frightening as they may appear, create peripheral investment noise, which should not impact on your investment strategy in the long-term.

Successful investing towards sustainable wealth creation, depends on retaining composure and staying vigilant against the destructive potential of fear.

In closing, let’s all take a few deep breaths, remain calm and objective and remember we’re in this together. Rest assured, besides working remotely, it’s business as usual for us and we’re here to take your calls, respond to your messages and meet with you as needed. Expect another communication shortly with further information regarding our current operational procedures, for your information.

Best regards
Dave Fisher

Leave a Reply

Your email address will not be published. Required fields are marked *