Prato Perspective- 10/02

October 2, 2020

Early today President Trump announced he tested positive for Covid-19 and stock markets have reacted with some volatility to the news. It is often said that the stock market does not like uncertainty and the media outlets all have their experts in front of the camera fueling any uncertainties with their opinions during non-stop coverage today.

Although there is a slight chance of this being a tragic event for our country in the future, today it is nothing more than the President and some of his staff having to ‘work from home’ in quarantine. Only time will tell how severe the President’s case of this virus will be. Rather than focusing on the media and all the what-if situations the future may hold, it is beneficial to remind ourselves that there is a process in our country to account for unforeseen situations at the highest levels of our government. The 25th Amendment of the US Constitution addresses the situation of the President becoming unable to discharge the powers and duties of the office. This is something that our country has confronted in the past when President Reagan was shot in 1981. Our government continued to operate 39 years ago and will continue operate in the future if necessary.

Our outlook on the stock market volatility at Prato Capital today is the same as yesterday and the day before – short-term market volatility should not be the reason to change an investment strategy. Our philosophy remains the same. Start with a Financial Life Plan (FLP), build a balanced and diversified portfolio based on our client’s risk tolerance to support the FLP, and continue to follow through with items like protecting the FLP with insurance, smart tax strategies, and estate planning as needed. An FLP plans for the ups and downs of the stock markets, not just like we have seen today but as we have seen throughout this year and previous years. The process of having the FLP and focusing on reaching future financial goals helps our clients look past short-term market volatility and look forward to living their life as they plan.

The chart below shows the growth of $1 since 1929 invested in the S&P 500. Over this period, President Roosevelt and President Kennedy died in office. Since the 25th Amendment was ratified in 1967, the section dealing with a President becoming unable to discharge the powers and duties of the office has been used several times. Through these potentially volatile periods in our nation’s history, long-term stock market returns have consistently increased over the longterm. We encourage our clients and other investors to look past the headline driven short-term market volatility and focus on future financial goals and their Financial Life Plan.