It’s All Relative – Why Facts and Performance Disconnect

April 23, 2020

Here we are, now exactly one month since the market bottom. Will that be the final bottom? We can never know that for sure, but we do know the markets have put some distance between the bottom and where we are today. On March 23, the S&P 500 was at 2237, and today we stand over 500 points higher.

The Last Month:

If you reflect on the last month, this was not a month filled with good news. Here are just a few of the happenings:

  • Depression predictions abound with economic declines forecasted to be bigger than ever at -20% to -50%
  • New unemployment claims at record levels pushing unemployment up at an unprecedented pace
  • Record declines in the dollars of mutual funds and ETFs, even larger on a dollar basis than in 2008
  • Fed has to step in to provide confidence and liquidity to the most liquid market of the world, US Treasuries
  • Virus spreads continue across the globe

To build on that last point, it’s interesting to look at the virus data. Below, according to Johns Hopkins’ site tracking the data, you can see the global growth in the number of confirmed cases of COVID-19.


Back on March 23, there were 378,100 confirmed cases of COVID-19. On 4/22/20, there were 2,592,845 cases. To put that in perspective, there were only about 14% of today’s cases globally a month ago. The vast majority of cases have been since the market bottom, not before. In other words, this virus has gotten worse, a lot worse, since March 23rd.

The U.S. data is even more tilted. According to the same site, today there are 826,184 cases in the U.S. But back on March 23, there were 43,700, or just 5% of the known cases so far.

Markets Move Ahead of the News

This highlights the difficulties of the market. The market is never about what is happening today. Market prices have already adjusted to reflect what is known today. They have also adjusted to reflect what you, me, and every other market participant thinks will happen in the future. So, if we think bad might continue to happen and it does, the market doesn’t have to fall. That’s been the case time and time again with some of the unemployment numbers being released of late. Worst ever, market up. Make sense? Not if you think about the markets in absolute terms, in good or bad terms. But if you reframe to think about relative terms, then it does. Number bad, expectation worse, markets up. The sentiment around the market doesn’t have to be good to move up.

We aren’t at the end of this virus and likely won’t be for some time. The economic toll is still to be determined as we work our way through this. Governments, companies, and everyone else will continue adjusting to the new reality that is changing daily. So will the market. There’s already an expectation out there about how bad this gets before it gets better.

Change Your Mindset:

Timing is always difficult, if not impossible in the markets. This last month highlights this challenge yet again. The important thing for you as an investor is to not think about your investment timeframe in days, weeks, or even months. Your dollars are there for years and even decades to come, which creates the need for a much more strategic mindset than being taken over by the day’s news.

We continue to do that consistently here. We are watching for opportunities to harvest more losses if they come, to swap back from previously harvested losses, and to find areas to rebalance from and to. In addition, we continue to strategically think about every holding in the portfolio and how these should be represented based upon expectations of the long-term future. Volatility, like we have seen, creates some of the toughest times investment-wise to hold on. But to those that do and do with discipline and a plan thought of ahead of time rather than reacting to the moment, end up in a brighter place.

The S&P 500 Index includes a representative sample of the largest 500 companies in the U.S.

Disclosures: Past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk.  Future performance of any investment or wealth management strategy, including those recommended by Balasa Dinverno Foltz LLC (BDF), may not be profitable, suitable for you, prove successful or equal historical indices.  Historical indices do not reflect the deduction of transaction, custodial or investment management fees, which would diminish results.  Any historical index performance figures are for comparison purposes only and client account holdings will not directly correspond to any such data.  BDF clients must, in writing, advise BDF of personal, financial or investment objective changes and any restrictions desired on BDF’s services so that BDF may re-evaluate its previous recommendations and adjust its investment advisory services.  BDF’s current written disclosure statement discussing advisory services and fees is available for review at or upon request.

Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this commentary serves as the receipt of, or as a substitute for, personalized investment advice from BDF.