This is Steve Auth. I'm the Chief Investment Officer of Equities at Federated Hermes.
What advice do you have for investors during this unprecedented time?
Our best advice, frankly, is to just hold the ground. That's what we've been telling people to do. When you've got, what we consider here, to be a short-term, i.e. 12 to 18 month bear market, within a long-term uptrend, the worst thing you can do is to get cute and sell yourself out of stocks and hope you're gonna get back in at lower levels. You never get back in, in my experience. The lower levels never come as you low as you'd think, because everyone sees that the future looks a lot brighter.
So, our best advice to people is just hold on and if things work out the way anticipate that they will, your stock portfolio should be worth a lot more, come 18 to 24 months. If you're really brave, average in here, that's the best thing you can do in short-term bear markets is average in, especially on down days. So, if you've got some cash set aside, that's a great thing to do. But, if you're a little less brave, I would say just try to hold on and you should, all odds are pretty good, that you should be in better shape 18 to 24 months from now.
What kind of economic recovery can we expect?
We think economic recovery's likely to be kind of choppy at first. We're not in the L-shape scenario, they call it, that's sort of the meltdown scenario, where you're in a, maybe, a five- or seven-year recession, sort of a Great Depression style. There was a moment there when we were considering, gee, this could happen, but for that to happen you would have had to have the Fed step aside or maybe even put its foot on the throat of the economy, like they did in 1930. We think the Fed and the policy action globally has taken the L scenario off the table. The V, which some of the bulls are in favor of, is like a short stop and then we're gonna recover, come right back to where we started by June or July and head off to the races. We think that's unlikely too.
There's been a lot of collateral damage here that's gonna take a while to work through. There's certain businesses, I think, may not come back and certainly the way we do business is gonna change as a country. So, we're more in what we call the U-shaped scenario. So, pretty sharp pullback right now, obviously, the economy's stopped, pretty sharp bounce back out, if you will, once we restart. Although, it'll probably be a gradual bounce out as one county, one sector or one business at a time gets restarted. It's not gonna be as lights on as it was lights off. So, we think that'll take a few quarters and then we'll get back to trend growth by maybe this time next year.
Disclosure: Views are as of April 15, 2020 and are subject to change based on market conditions and other factors. These views should not be construed as a recommendation for any specific security or sector. Past performance is no guarantee of future results. No method of investing can assure a profit or protect against loss in declining markets. Stocks are subject to risks and fluctuate in value. Federated Global Investment Management Corp. 20-30147 (4/20)