J. Andrew Concannon

Senior Partner

Maintain a Disciplined Approach

April 2020


Mitigation efforts to slow the spread of COVID-19 are affecting the daily lives of people around the world. Some 2.6 billion people are now living under government imposed restrictions due to the virus. What seemed in February to be an event limited mostly to China, much like SARS in 2003, has quickly become a global pandemic. The mandatory closings of schools, businesses, and other institutions to slow the virus’s spread has layered financial losses on top of health concerns and left many investors fearing more to come.


The degree to which the virus mitigation efforts have negatively affected the economy will become clearer as economic reports are released. But it is already clear that the economies of the U.S., Europe, and many other countries are contracting sharply. Also clear is that economic fears and liquidity issues have led to sharp declines and extreme volatility for financial markets across the globe. What is not clear, however, is how long this will last. Past pandemics have been temporary, and this one will be no different. But how long is temporary?


Until that can be defined, uncertainty will continue to cause market volatility and perhaps even lower lows. But the stock market, as it has in the past, will likely bottom and move higher before the virus is contained or the economy bottoms.1 Thus, those waiting for the all-clear signal will likely miss the opportunity to buy stocks at low levels.


What should investors do during these uncertain times? At Goelzer we stress the importance of maintaining a disciplined investment plan. And during calm periods, we find clients to be very accepting of that advice. However, it is during difficult periods—when markets are falling and emotions are high—that a disciplined investment plan proves its greatest worth. We understand that a sudden drop in portfolio value, with no certainty around when it will bottom or how long it will take to recover, causes investors to question that discipline. Yet it is discipline, not emotion, that leads to better outcomes.


So, unless your personal situation has changed, our advice is to stick with your investment plan—remembering that it was created knowing that rough markets would occur from time to time. For many of you, that means it is time to rebalance your portfolio back to its target asset allocation by moving money from cash or bonds to stocks.


By rebalancing your portfolio, we can reduce both the time and return required to recover from the recent market decline. For example, with no rebalancing, a 30% stock decline requires a 43% stock rebound to recover. But, by rebalancing following a 30% stock decline, an investor starting with 60% stocks and 40% cash can reduce to 30% the stock rebound required to recover.


Investors moving more money into stocks now will be doing so at a time when our projections for long-term returns are rising, not falling, despite the potential for further declines in the short run. Our model shows the current 10-year projected annual return for the U.S. stock market has increased sharply to a range of 7.3% to 9.6% from 3.1% to 5.2% at the start of this year.2 Simply put, projected long-term stock market returns rise as the market falls.


Yes, markets do recover and, although the timing is uncertain, we believe this time will be no exception. I began my career in July 1987. Within months, the U.S. stock market lost one-third of its value—including a one-day 20% plunge! Since then the stock market has experienced two declines of more than 50% and several others of more than 20%. Yet, from the start of my career until now, even accounting for the recent decline, the U.S. stock market has provided a total return of 1,616%, or 9.07% per year.3



1 All references to the U.S. stock market levels, returns, and projected returns are for the Standard & Poor’s 500® Index.


2 As of March 27, 2020.


3 Source: Bloomberg – total return with dividends reinvested for the period beginning July 2, 1987 through March 27, 2020.


Goelzer Investment Management, an Indianapolis based firm advising on assets in excess of $2 billion, provides highly tailored asset management and investment advisory services to institutional and high-net-worth private clients. The firm manages discretionary and non-discretionary portfolios that can be customized to meet client-specific investment goals. Goelzer’s proprietary investment and wealth management research has helped the firm focus on building long-lasting client relationships and delivering successful results.