- Hey everyone, my name is Alvin Carlos,
I'm a Certified Financial
Planner professional
and co-founder of District Capital.
We help young and mid
career professionals,
mostly in the Washington DC area,
and other parts of the country
reach their financial goals
through holistic financial planning.
Thanks everyone for tuning in.
Hello Shannah, hello
Jamie and other folks,
thanks for tuning in.
I thought I would go in here and share,
what I know so far in
terms of what's happening
with the stock market, what to expect,
and what does it mean for me and you?
As you know,
the stock market has been
very volatile of late,
and it's fallen by more
than 20% this year,
and everyone is staying at home
so people are not spending.
So there's a lot of concern
that we will go into a recession
here in the US, and in
other countries abroad,
if workers are getting sick,
then they can't come to work,
especially if they're
part of a supply chain,
so supply chains might get disrupted,
and in some countries they already are.
There's a lot of concern
that some businesses,
particularly in the
travel and leisure area,
might be hit and they're
gonna lose revenue,
maybe they might start
to fire some employees,
and some of them might go into bankruptcy.
As you know oil prices also have,
gone down significantly because
of a geopolitical price war
going on between Saudi Arabia and Russia,
so there's also concern
in that particular sector.
And also there's general
fears of instability
in the financial market,
especially given that we don't
know what's gonna happen,
and there's a lot of uncertainty.
So in response what's been
happening is central banks,
the main central banks in
the world have acted swiftly
to provide a stimulus to the economy.
So in the US the Federal
Reserve recently cut its,
interest rates by a full 1%,
and the Bank of England also did that,
European Central Bank also did that.
I think China also cut the
rates to help stimulate
the economy.
In addition, the Federal Reserve,
also has promised to help
businesses get up to one trillion
in funding, for the short term
to make sure that business
don't run out of cash,
and so, to help them stay open.
In addition to that,
governments around the world,
are also acting in terms of
getting some fiscal stimulus
underway.
So in the United States
you might have seen
in the headlines,
the administration wants to
do a $1 trillion stimulus,
including helping out
businesses and sending checks
to all Americans,
or maybe not all Americans
but most of them.
We've seen government response
also to stimulate the economy
in the UK, Germany, Japan,
Italy, Australia.
So that's what's happening in
terms of stock market falling,
central bank is trying to act to prevent,
the economies in going to recession,
and governments are also acting.
So in terms of what to expect,
obviously no one can see the future,
but in terms of the uncertain environment
on how this is all gonna play out,
we expect more stock market volatility,
as things continue to unfold.
But in general I think,
we need to remind ourselves
that the stock market
is a very volatile instrument to,
invest, and so I think going into it,
we need to understand that
on average every year,
stock markets can swing as
much as minus 33% up to 44%.
And that's any given year,
obviously that's not gonna happen,
every year in terms of the
extremes, but within that range,
we need to understand
that from the outset,
stock markets can swing that much because,
even though, it's a reflection of,
the economic activity
and profits of companies,
it's also a voting machine that
is driven by human emotion,
like fear and optimism.
In terms of the studies
that I've seen out there
in terms of scenarios,
I've been following what
McKinsey has been producing,
so you can Google that too.
J.P. Morgan also produces
these Weekly Strategy Reports,
so they just produced the
latest one, two days ago.
So their scenario,
(clears throat)
is they're forecasting that,
there's most likely gonna
be economic contraction
in the first quarter and
second quarter this year,
because everything is just
going to a standstill,
while this is happening,
and the only thing that they don't know
and nobody knows for sure is,
when will recovery take place?
So I think the optimistic scenario,
or the best case scenario
might be we'll see a recovery,
starting in the fourth
quarter of this year,
as things go back to normal.
And I think worst case scenario might be,
it'll get delayed and
we won't see a recovery,
maybe not until second
quarter of next year.
But I think a lot of the
scenarios that I'm reading,
expect corporate profits to
rebound at some point in 2021,
when things go back to normal.
But these are scenarios,
nobody knows the future.
And so the next question
is "Okay, we don't know
exactly what's gonna happen,
"things are very uncertain and volatile,
"what does that mean to me?
"What does that mean to you?"
So, I guess in terms of practical matters,
as I mentioned, Federal
Reserve has cut interest rates
so if you have a mortgage or
if you have a student loan
or a personal loan or any
other type of that you might
wanna look into refinancing.
That, it's not gonna be for everyone,
but make sure you talk
to your financial planner
on whether that's right for you,
but it's something that
you'll need to look into.
In terms of, still on interest rates,
you may also have noticed
that the interest rates
in your bank also might have been falling,
and most likely they will continue to fall
because the Federal Reserve
recently cut interest rates.
But you know, I wouldn't
be too worried about that.
Hopefully, you have some
emergency fund to tide you over
and 1%, or 1 and 1/2% may not
be that big of a difference.
I suggest people continue to
contribute to their 401(k)
if you already have that setup,
so you can actually take advantage of,
what the technical term for
that is dollar cost averaging,
which means here if you're
contributing to your,
401(k) every two weeks, or twice a month,
then while stock prices are low,
then you're buying stocks at a low price.
And remember,
especially if you're still
early in your career,
if you're in your 30s or 40s,
you're not gonna return to
like 20, 30 years from now,
and we're gonna be net buyers.
If you're going shopping,
and you're buying stuff,
you want prices to be low, right?
Not high.
So we're gonna be net buyers
for the next couple of decades,
so it actually favors
us to buy at low prices.
If it makes sense for you
to contribute to an IRA,
so you make sure you
wanna do that by April 15,
if that makes sense for you.
Again, make sure you talk
to financial planner,
about that.
And I think, the main message
that we wanna get across
is to stay the course and think long term.
I know things are scary
whenever you read the headlines,
things look really bleak and scary,
and I think part of the media's job
is sometimes to highlight
all of these things that are,
you know draw people
into reading the news.
So think long term,
I tend to look at, what Warren
Buffett says in these times,
'cause I'm a big fan,
Warren Buffett is one of the
greatest investors of all time.
He runs a company called
Berkshire Hathaway,
a huge conglomerate.
So he wrote an essay actually,
you should Google that back
in, October I think in 2008,
when everything we thought
was gonna shut down
during the 2008 financial crisis,
he wrote this op-ed.
And he gives examples,
on why we need to think long
term and stay the course.
So, for example, for the past
100 years or in the 1900s,
if you think about it, the US
has endured two World Wars.
We've gone through the
Vietnam War, the Korean War,
we've been to the Great Depression,
that took a couple of years,
we've had the flu epidemic.
And during all those times,
the Dow Jones which is one
measure of the stock market
rose from 66 to 11,500,
and now, I think it's around 20,000.
So, if you think about it,
it hasn't been a smooth ride,
it's been a bumpy ride, but
because of human ingenuity,
things continue to improve,
and companies continue to make money.
Obviously, some companies
will go bankrupt over
the course of history,
but some of them will
continue to stay strong.
And so we just need to
look at the big picture.
There's a study that,
was released back in 2018,
that looked at 70 years of
data of the US stock market,
so, that study was saying,
that downturns that are over 20% or more,
which is what we're in now,
on average, last three and a half years,
so it could be more, it could be less.
So if you think about it, if
you don't really need the money
in three and a half years,
which would apply if
you're not about to retire,
if you're still in your early
or mid stages of your career,
then you can essentially
just write this out.
Again we stressed the importance
of remaining invested,
if for example you had
$10,000, back in 1950
you invested in bonds, treasury bonds,
and that would be worth $450,000 in 2013.
If you remained invested
in the US stock market
throughout those time,
amidst all the Korean War,
Vietnam War, Saddam Hussein,
9/11, 2008 Recession,
so that $10,000 will be
worth 6.9 million in 2013.
So just emphasizing the
importance of staying the course,
thinking long term.
So, at this point,
if anyone has any questions,
I'll be happy to answer them.
While you're thinking about question,
I think, I also posted
maybe one or two days ago
in Facebook, this graph
about timing the market,
and how it can be costly.
'Cause at this point and time,
when everyone or a lot
of people are panicking
or some people are panicking,
one tendency is you know how when you're,
if your hand gets burned,
so the tendency is you
wanna get your hand away
from what's burning you.
So I think that might be the
reaction to the stock market
right now, and I think
that Kraft was saying,
"If you miss,
"the five best days in the stock market
"because you thought you
could time the market
"and just get out and get back in,
"so you will probably have
lost, I think more than $10,000,
"assuming you have $10,000
invested over 20 years.
"If you missed the 30 best
days of the stock market,
then you're actually gonna have
like a zero percent return."
So again,
just stressing the importance
of remaining invested,
staying the course and
sticking to your plan.
If you have a financial plan in place,
then we've sort of know that
these things might happen
over time, and it probably
will happen again.
Let me see if you have any questions here.
Okay, one question here.
How does it look like for
the job market overall
and companies hiring?
So that's not really in my expertise,
but I would say that it really
depends on your industry.
Obviously, some industries
are gonna be more effective
than others.
As I mentioned, travel and leisure
is gonna be heavily affected.
It's reasonable to expect that there might
be some layoffs there,
oil and gas industries
also heavily affected.
But I suspect that some industries,
won't necessarily be affected,
so if you happen to be in that industry,
companies are always hiring
because there's regular turnover.
For example in our firm
we're actually looking
for a part-time associate right now.
I think it depends on the industry,
and I hope you find a really
good job that you like.
And I think we sent a link
here to Warren Buffett's
2008 letter, thanks for
sharing that Shannah.
Anyone else who,
has a question?
So I guess with that, thank
you everyone for tuning in.
And,
again, we emphasize to,
stay the course, think long
term, and stay safe everyone,
and we're gonna get through this.
All right, bye.
