Category Archives: Economy and Investing

In An Uncertain World

By Larry Luxenberg  

We fool ourselves if we ever think that we can foresee the future but some times are murkier than others and now certainly fits that bill.

My test for this is to think back on the last week, the last month, the last five years and consider all of the major things that have happened and how unlikely it is that anyone could have predicted many of the major developments.

People do not like to think that they have limited visibility into the future. It’s especially important when we have our investment hats on that we realize the limits of our knowledge and act accordingly.

An investor must be an optimist or else they would not invest. They must believe that the future is brighter than the present, that there will be inventions and progress that will generate returns to those who make their capital available to promising ventures.

But just as surely an investor must realize that bad things happen to good people and investors should control what they can control and weigh risks carefully before deploying capital.

Applying my test and going back five years to late February, 2020, we were on the verge of the biggest global health crisis in a century. For the first time a huge chunk of the modern economies was deliberately being shut down. We were in the final year of the first Trump Administration. Russia had not yet invaded Ukraine, artificial intelligence was a term, not a “thing,” and cryptocurrency had not yet reach trillion-dollar status.

That spring of 2020 was a time of great fear. People were hunkered down to avoid the deadly disease and the stock market declined the furthest in a short time – by nearly half in less than a month – of my nearly half century career on Wall Street. The collapse of economic activity was the greatest in a short time since the Great Depression of the 1930s. In one week alone, more than 10 million people lost their jobs; a week unlike any in American history.

Over the next several years more than one million people died at least in part because of Covid 19. We will never know the exact total and defining a Covid death is remarkably difficult but we can be confident that it was a lot. Despite this towering loss, the economy and the stock market bounced back much, much faster than most serious observers thought possible.

On March 23, 2020, the Federal Reserve announced that it was coming to the rescue and that marked the bottom of the bear market. The stock market sprang to life before the epidemic had barely begun to exact its grisly toll.

A friend asked me for my prediction of when the economy would start rebounding and I predicted by Memorial Day. In retrospect, ludicrously wrong. And yet not too long afterwards the economy began to respond.

One of the biggest surprises for me, while I was still in hiding in a secure location, was that most people decided this was a great time to buy a new house and the housing market had one of its greatest surges in history.

Another, perhaps even bigger surprise, was that policymakers got their economic responses quite close to an optimal mix. Shutting down a massive economy and then trying to bring it back to life was largely unheard of and no one really knew how to respond. The Federal Reserve was as aggressive as it ever gets and Congress and the Administration shoveled large piles of money at the problem.

Despite the great unknowns, these leaders came unusually close to the proper response. Looking back, it’s clear that they went a bit overboard and triggered a several year surge in inflation. But the risk of falling short was far greater and a shortfall in stimulus could have resulted in a severe recession or depression that could have lasted decades.

Widening our scope to take in the last two decades, it’s clear that people are still traumatized by the mortgage and financial crisis of 2007-2009 as well as the Covid economy and its aftermath. The response around the world to the aftershocks could lead to a third trauma. We have no idea what this third trauma could be but trying to regain your footing after some big stumbles can be quite difficult.

Policymakers are grasping at solutions to what appear to be difficult to define problems. Nearly every major country and alliance has taken major initiatives — perhaps gambles – and no one can be certain that they are even attacking the right problems. The global upheaval seems at least on a par with the scale of change we normally see after the end of a major war or some similar big event.

Most Americans believe the country is on the wrong track. It’s impossible for them to believe that the U.S. has emerged from these two decades of turmoil in better economic shape than just about any other major country. By most measures, the U.S. economy is in as good a shape as it’s been for a half century.

The inflation surge has reversed and while prices remain elevated, new price changes are muted. Unemployment has ticked up and may be in a danger zone that portends a recession but employment is still close to the best it’s been in a half century. Wages have been going up for seven or eight years, particularly among low earners.

While the labor market is not as strong as it was a year ago, jobs are still plentiful although not every opening fits a candidate. Housing is a problem for new buyers as prices remain high along with mortgages and house are difficult to afford for new buyers. Those who have owned houses, by contrast, are in good shape.

Why then so much fear and discontent? We have been going through massive changes for the last few decades and that scale of change is unsettling and scary. As our society turns inward, these fears could become self-fulfilling.

Despite these concerns, the U.S. stock market has been unusually strong for several years, showering riches on investors. This quiet bull market has been led by large, high profile technology stocks and has produced one of the best periods for wealth creation in history. These gains are not as widely distributed as some other sources of income, but through IRA retirement accounts and 401ks, stock market gains do reach many Americans.

In 2024, the U.S. stock market completed two years of back-to-back gains of more than 20 percent, one of only five such times in the last century and the first since the late 90s. In 2024 alone, the stock market reached 55 new highs and added $12 trillion to its total market capitalization, ending at $62 trillion.

It has been a highly unusual period because so much of that stock market value is held by a handful of stocks, mostly the high-profile technology stocks: Apple, Microsoft, Nvidia, Amazon, Google, Meta and Tesla. The top 10 stocks in the S&P 500 make up more than one-third of the value of the index, almost double the percentage of eight years ago.

This has resulted in these stocks being very highly valued and vulnerable to any short-term setbacks. In the last two weeks, the Nasdaq composite index, reflecting largely these stocks, has corrected by more than ten percent. At the same time, gauges of investor fear have surged and consumer sentiment has deteriorated. We have also witnessed a small rotation of stock market leadership to non-technology stocks.

We should not, however, rush to judgement that any of these trends will continue. Stock market and economic trends are only clear in retrospect because lots of little moves and false starts are common. For generations stock market analysts have tried to find predictable patterns to guide their investing and these efforts have generally failed. To deal with the huge amount of information humans see every day, people try to categorize and find patterns as much as possible even in the face of random data.

A good example of the difficulty of determining trends is that several years after a recession ends, a committee of the National Bureau of Economic Research, with many of the top economists in the country, looks at all the data and argues about when the recession began and ended.

Modern stock market analysts, armed with the fastest computers and artificial intelligence, constantly probe for profitable patterns. The rewards for finding clues to market movements are immense but success is so far beyond our most advanced capabilities.

So, sad as it is, the best course that practitioners and academic financial theorists have found is simply to ride out these market waves, accept the amount of risk appropriate for each investor and recognize that the future will unfold in new and exciting ways.

March 10, 2025

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A Stock Market in Free Fall

By Larry Luxenberg  

On April 3 and 4, the U.S. stock market declined by close to 10 percent. According to former Secretary of the Treasury Larry Summers, this is the fourth largest two-day decline since World War II. As I write on Sunday night, stock market futures suggest the market could decline an additional 4 percent at the opening tomorrow morning.

All four such declines have occurred during my 42-year career as a professional investor. The prior three times were: the stock market crash of 1987; the financial crisis of 2007-9; and the early stages of the Covid-19 pandemic in March, 2020. In these three earlier cases, the stock market recovered at least partially in a relatively short time.

While each instance is different and stock market investing never comes with a guarantee, most of the time it pays to be patient and not try to out guess the millions of investors around the world. Each time the market declines so fast, it is bound to be scary; it seems like this particular instance is different. While in previous times, the market recovered, this time, we think, it’s down for the count.

The proximate cause of this latest decline was the announcement on Wednesday, April 2, after the stock market close, that the U.S. was about to impose the highest tariffs in generations. While the market knew that tariffs were coming, most investors did not expect the tariffs to be nearly this high.

These tariffs are so high that the whole system of international trade, largely in place since World War II, will be abruptly and decisively disrupted with big effects on every economy around the world. To make matters worse, this was the latest development in a hyper active second Trump Administration, little more than two months old, that has made so many major changes so fast that it is impossible to keep up.

Since taking office Jan. 20, the administration has dramatically overhauled the Federal government, radically changed international aid, redefined ally and foe, and is setting in motion one of the biggest tax cuts in history. Add in the largest tariff change in almost a century and it’s a lot for investors and foreign governments to digest.

Through mid-February, the stock market was at record levels after two strong years and one could make a case that a pause was in order. The market, by some measures, was not healthy because so much of the gains were concentrated in seven large technology companies led by Apple, Microsoft and Nvidia. With valuations stretched, it didn’t take as much to get markets to tumble. And investors were already concerned by the blizzard of changes.

To make things even worse, the U.S. economy by many measures was doing just fine. Unemployment was low, inflation had come down from too high levels and wages were increasing. Of course, problems always exist: housing was unaffordable for much of the population, gains were not evenly distributed and much of the country was in economic doldrums. Then too, having recently suffered through a once in a century global pandemic and earlier, a dramatic financial crisis, many people were worried and upset. It didn’t take much to induce full scale panic.

Where will this all lead and what to do about it? As one television guest said during the financial crisis, “If you think you understand what is happening, you’re not paying attention.” The future is always murky but sometimes it’s murkier than others and this is one of those times. No one can be confident that they know where the global economy and markets are heading.

But if we look to prior examples – and this is certainly not a guarantee – in modern times, markets have recovered, generally in a matter of months or a few years. The one exception is during the Great Depression of the 1930s. In that case, depending on how you counted, investors who remained solvent recovered in a half dozen to 15 years.

The Great Depression was compounded by serious policy mistakes and some new and untested institutions. Since that time, we’ve added institutions to regulate securities and banking and the Federal Reserve Board is much more experienced and sophisticated.  Certainly, similar mistakes could happen again but the odds are against it. In general, investors who think they can divine future events and outsmart markets frequently suffer serious financial harm. Those who have diversified portfolios and are patient often achieve better outcomes.

While we are not oblivious to the financial carnage, we still believe the likeliest and best course to recover is to be patient and leave the frenetic trading to others. Years ago, we read a book about the stock market crash of 1987. The book, A Zebra in Lion Country, by legendary small cap investor Ralph Wanger, talks about Wanger’s heroic trading during the week of the 1987 crash. At the end of the week, he looked back on all the trading and concluded that the many trades had accomplished nothing. And although it doesn’t feel satisfying, usually doing nothing is the best policy.

April 6, 2025

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A Reasonable Request?

By Larry Luxenberg  

Last week a client told me that he believed a recession was imminent and he wanted to take investment actions capitalizing on that view.

At first blush, this seems to be a reasonable request. Many commentators foresee a recession as the result of the Federal Reserve’s aggressive interest rate tightening cycle.

However, this view reflects several beliefs about investing that are simply not true. One of the main suppositions is that the stock market acts in line with what is happening now. In fact, the stock market tends to take a collective view of the economy 6 to 12 months ahead and discount those future events.

In the case of this expected recession, if it’s visible now, stock market action should have discounted it last year.

Even more difficult is the idea that anyone can predict a recession ahead of time. To get an idea of how difficult it is to predict a recession consider this. Officially, recessions are designated by a group of nationally prominent economists at the National Bureau of Economic Research. One of the main indicators of a recession is two consecutive quarters of decline in Gross National Product. However, the economists look at many indicators of economic activity in determining when a recession began and when it ended.

But what’s most telling about this group of distinguished economists is that they determine the dates of a recession several years after the recession has ended and the subsequent recovery is well under way. In essence they struggle to call the recession afterwards and don’t even attempt to predict it ahead of time.

So what my client wants to do is something no economist would hazard and after he accomplishes this feat he then has to backtrack as much as a year to capitalize.

If you ask for the impossible, often you will be disappointed.

Instead, it makes more investment sense to take into account the regular occurrence of recessions and bear markets when you put together your investment portfolio. Being able to ride out these downturns without shifting positions has produced powerful long-term returns.

Over the last century, investors in the largest American companies (measured by the Dow Jones Industrial Average and the S&P 500) have doubled their returns on average every seven years. This doesn’t occur like clockwork but the longer you give it the closer you’ve gotten to these results.

When I began my investment career in 1982, the Dow hovered around 800 as it emerged from a two year double recession. Today, after a terrible period for the stock market, the Dow is almost 33,000.

That’s a great period for investors who shunned predictions and stuck with the market through thick and thin. Trying to save yourself some short-term pain is just as likely to sabotage your long-term performance as it is to help.

If there was a way to avoid the pain, I would be among the first to sign up. Instead, I do the next best thing. Put together a diversified portfolio that’s designed to prosper despite market swings and keep my investments intact as best I can.

No one knows whether this approach will work in the future but it makes more sense than trying to find a better crystal ball.

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Know-It-Alls

By Larry Luxenberg  

Beginning investors think they know more than they do. Experienced professionals accept uncertainty and are secure in the knowledge that they cannot predict the future.

It is not a harmless affectation to think that you can know the future. It is one of the costliest mistakes an investor can make. Only luck can save an investor who is overly confident in his foresight.

Often, investors spot a trend and think they can make money at it. They think they alone, among millions of investors globally, who spot this particular trend and have the sagacity to capitalize on it. Most dangerous are those who get lucky early in their investing efforts and conclude that they are investment geniuses.

Some investment geniuses exist and I’ve known several. But investment geniuses are much rarer than the number of people who claim that rank. A wise investor I know, compared investing in stocks to mining low grade ore. Picking up a little ore efficiently can make you money if you are patient and work hard. You won’t get rich quickly but over time, the rewards add up.

A common investment mistake is believing that the investment world is static when in fact it is highly dynamic. By way of illustration, consider a trend like the widespread legalization of marijuana. Without doubt, the industry will grow. More marijuana will be consumed, marijuana businesses will add many employees and revenues may skyrocket.

This trend may help investors but it does not guarantee that investors will profit. At the start, there may be no public companies in the industry. Small private companies may dominate. Over time, some of these companies may go public and grow large enough for investors to buy shares.

But if the industry grows fast, soon dozens and perhaps hundreds of companies will spring up to compete for the business. Each company will issue shares and some companies may issue shares repeatedly. As the number of shares of stock in the industry rises, the higher profits are divided among more and more shares. Shares often grow faster than profits. Even if the industry grows faster than the investor anticipates, the investor’s share price may not rise and he could even lose money.

Some version of this sequence has happened many times. In the late 19th century, there was only one automobile company, according to Wikipedia. At the peak, there were 1900 automobile companies. That number plummeted during the Great Depression and by the 1950s, the Big Three dominated U.S. production. Not all the early companies were flops. Some were acquired and their investors made money but many companies became worthless. This is a great example of a big and successful trend. At the start, only a handful of cars were produced. Eventually 17 million or more were sold annually. While the industry had nearly a century of growth, over much of that time, investors were left in the cold.

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The Law of the Jungle

By Larry Luxenberg  

The way humans have evolved over millions of years is spectacularly unsuited for investing (Think Ramapithecus and similar forebears). The events and the results of the last year demonstrate that as well as anything could.

In most environments, survival is based on quickly recognizing threats and reacting. In the stock market, the best results come from putting some thought into investments ahead of time and then ignoring threats and being patient.

In mid-March last year, in the early stages of the pandemic, the stock market had a historic two-week swoon. In that period, the stock market had three of the 20 biggest single day drops in the more than 100 years of modern stock market history.

A global disease closed economies around the world with unprecedented speed and thoroughness. In time, the pandemic turned out to be much worse in many ways than most experts predicted. Still, the economy, while not fully back, has recovered more quickly than most forecasters anticipated.

Any prudent investor could be excused for taking money off the table last spring and sitting on the sidelines until the devastation was behind us.

And that was the exact wrong thing to do.

Looking back over the last year, we have had a historic stock market rally with stocks increasing more than 60 percent in the U.S. to all-time record levels.

Within the market, we have had an equally dramatic turn of events.

As the pandemic raged, giant technology stocks, which benefited from the economic activity of shut-ins, soared. A huge percentage of the gains from spring to early fall were concentrated in a handful of stocks such as Apple, Facebook, Microsoft, Google, Netflix and Amazon. Tesla became the most valuable automobile stock in history.

And then quietly, it all changed in undramatic fashion. The big tech stocks continued to drift upwards but stocks that had under performed for a decade, the small cap value stocks, the energy stocks, real estate stocks, cruise ships and airlines surged.

These unloved, even hated stocks had one of their half dozen biggest periods of out performance in the last century and for the full year dramatically outperformed the tech darlings.

In the spring of 2020, any investor who was paying attention was ready to panic. There was no plausible explanation for sticking with the program. No story made sense. In practice, on March 23, 2020, the Federal Reserve launched the most aggressive rescue program in modern history and it worked beyond anyone’s expectations. In a shocking display of unity, the Congress passed dramatic legislation that also played a key part in reviving the economy. Into 2021, the Fed and Congress continue to do their parts to keep the economy climbing.

Despite this volatile period that no market analyst could possibly have predicted, individual investors faith in their ability to foresee stock market gloom is still undiminished. People who badly misread the landscape a year ago to their own detriment, are convinced that they see the pratfalls ahead. Surely after the stock market has risen so far so fast, it cannot keep going.

Of course, no one knows. That is the big lesson of the last year. No one knows and anyone who thinks differently is an ill-informed fool.

What we do know is that over time, if the economy does well, the broad stock market should too. Over the last 95 years, since good data became available in 1926, the broad U.S. stock market, as measured by the Dow Jones Industrial Average and the S&P 500 have increased by 10 percent a year on average. Rarely has the market gone up close to 10 percent in a year but most years it has produced positive returns and only a quarter of the time has it produced significantly negative returns.

At a 10 percent annual return, the market doubles every seven years and quadruples in 14. My stock market career began in the summer of 1982 when the Dow was at 800. Today it is above 33,000. There has never been a time in those nearly 40 years when I could not have made a case that the stock market faced significant challenges and it was prudent to be wary. And yet, the prudent thing actually was to stay invested.

If you stay invested through thick and thin, you are highly likely to be the beneficiary of powerful returns. If you go in and out of the market, your returns are likely to suffer greatly. Big gains on a handful of days power portfolios and these rare big days are impossible to foresee.  The effect has been well documented.

For several decades consulting firm Dalbar has looked at investor returns compared to the performance of the mutual funds they invest in. Generally, investors get 1/3 to ½ of the returns their mutual funds generate because they move in and out at the wrong times.

In 1996, Fed Chairman Alan Greenspan made his historic warning that the market had risen too much because of “irrational exuberance.” At the time, the Dow was at 6437.

Surely, after a period of big increases the stock market is bound to cool off. After a spell of hot temperatures, we often have a cold wave.

However, every day logic does not factor into the stock market.

Stock market researchers have crunched the numbers. After periods of strong stock market returns, the stock market has produced average returns. After periods of weak stock market returns, the market has produced average returns. After periods of average returns, a similar result.

The lesson? Don’t guess. Don’t expect that your common sense will work on the stock market. Don’t expect that you are smarter or better informed than the millions of other people focused on the stock market and paid to do so.

What should you do? Understand your situation. Figure out how much risk of a difficult period can you sustain. Understand why you are investing and when you will be spending the money. Craft a diversified portfolio. Keep your plan flexible. Above all, don’t react to events and be patient. Don’t let your adrenalin and emotions guide your investments. Understand that investing is a long game and short- term movements are noise.

Over the long term, over decades, the stock market has the potential to be rewarding if you can keep your own behaviors in check. The stock market is inherently risky but the biggest risk is you, not the market. Here is the true law of the jungle for investors. Stick in the market and hear your returns roar.

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A Pig in A Poke

By Larry Luxenberg  

Every so often, complacency sets in on Wall Street. You never know how long afterwards bad stuff will start to happen but it’s a time to be vigilant.

For me, one of the warning signs is when people start to cut big blank checks. A few weeks ago billionaire investor Bill Ackman attempted to raise $3 billion dollars to buy something. Instead, investors threw money at him and he raised $4 billion.

Ackman gave investors vague clues about what he’d do with the money but only in time will they actually find out where the money will indeed go. He would like to buy a company or two and he’ll let you know when he does.

The actual investment vehicle is titled the Pershing Square Tontine Holdings. It’s a blank check company or more properly a SPAC, a Special Purpose Acquisitions Company.

Ackman has compiled an enviable investment record and there are checks built into the SPAC structure. Still, these vehicles normally appear during bull markets and disappear in bad times when investors are more reluctant to part with their money and fund speculative vehicles.

Sometimes it can be years before there is a reckoning. Sometimes, it’s only parts of the market that suffer. Still, every time there is a global pandemic and deep recession and yet investors are eager to buy a pig in a poke, I get nervous as a cat.

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Less is More Sometimes

By Larry Luxenberg  

As a result of the pandemic and economic downturn, there are now two kinds of Americans: those who are spending less because they have less money and those who are spending less because they don’t have anywhere to spend their money.

For an economy that is two-thirds driven by consumer spending, that doesn’t bode well for a quick recovery and overall statistics. But despite the crude economic measures we employ, the true purposes of an economy are to satisfy people’s needs and wants. If we possessed better statistics, those measures might paint a different picture.

For the first group, suffering will be epic — high joblessness lasted 6 to 8 years after the Great Recession and food insecurity remained high even longer —  and the bleak statistics will adequately measure their distress.

But for the other 75 to 90 percent of Americans, the picture could be quite different. Economists assume that every dollar spent is for something a consumer wanted and if they can’t have it or have to substitute something else, their satisfaction is diminished. That, of course, is a good shorthand and adequate in normal times.

What we are living through is anything but normal and normal statistics don’t capture our current experience. As half or more of the population lives through an enforced idleness, satisfaction has to come through different means. A leisurely trip to the mall is out. A free zoom call with distant friends and relatives is in. People are reaching out more and spending less on leisure pursuits, apparel, fixing up homes and myriad other things.

Many people remind us that “if you have your health, you have everything.” For the million or more people who have contracted the virus and for the 80,000 or so who have died, their health is compromised or they have succumbed. Stress has soared and with it crabbiness, abuse, substance overuse and mental illness.

For others, who retain their health, many have regained an appreciation for the simple pleasures of life that do not carry dollar signs. For large segments of the population, such as the vulnerable elderly, their first impulse after a murky loosening or even an all clear signal will not be to shop until they drop. Their first, second and third impulse may be caution and to keep the purse strings tightly clamped.

The result could be continued high unemployment, the failure of many already shaky businesses, and continued weakness in measured Gross Domestic Product and other key traditional economic measures.

But what of true happiness? That’s a harder thing to measure. Many people hanker for a simpler time. Now that it has been delivered to their doorstop, they may find that they don’t like that imaginary simpler time. But others may find that spending and happiness are not the same and while traditional measurements of economic activity continue to look dreadful, they are fulfilled and much happier than the economists believe that they should be.

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Out Like a Lion

By Larry Luxenberg  

March is typically an odd month, the transition from the harshness of winter to the promise of spring. This year it’s been the reverse in the worst way in modern memory.

The month began in New York as a normal time with mild weather, the stock market near record levels and unemployment at a half century low.

March ended in a totally unprecedented way with two-thirds of the country confined to their homes, an explosion of illness and death across the U.S., the biggest jump in unemployment on record by a factor of five and $8 trillion of stock market value wiped out.

Congress had just approved a record bailout of everyone, adding $2 trillion of debt to plug massive holes in an economy at a self-imposed standstill. Coronavirus cases had gone from a handful to more than 100,000, making the U.S. suddenly the world leader.

Muddled mixed messages proliferated and fear was rampant. While glimmers of hope popped up here and there like the regular appearance of forsythia, cherry blossoms and daffodils, the gathering storm overshadowed everything as the world braced for the mysterious plaque to strike and dissipate.

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Survival Mode

By Larry Luxenberg  

With the economy in free fall, for most businesses it’s a sudden shift to survival mode.

Most businesses spend most of their time trying hard to grow, to innovate, to take on new markets and better serve old ones. Few people with a choice go into business just to survive. But that’s where we find ourselves today.

You can’t grow if you don’t survive. Businesses that worked hard for decades to flourish, now find themselves facing excruciating choices. Capabilities and staff that were nurtured for many years, long established relationships, beautiful facilities — all are now on the chopping block.

President Eisenhower, the wartime U.S. commander of the European theater said that in war everything and everyone is expendable. With an imploding economy, that same attitude and urgency must be applied to businesses.

With a brutal recession on the near horizon, thousands of businesses will not survive. Those that hunker down and go into self-preservation mode quickly have a good chance to not only survive but to thrive after many of their competitors depart the scene.

Austrian economist Joseph Schumpeter called this the “creative destruction” of capitalism. After every painful recession, there is a flowering of innovation. It’s easy to see the destruction. Much harder to spot the bright new industries and new ways of doing business that are coming along.

After the 90-91 recession that shook America to its core, the Netscape browser appeared in 1995, ushering in the Internet and a towering wave of innovation.

Out of the current difficult period, good things will develop but only to those who survive and are sufficiently nimble to spot the emerging opportunities.

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A Bad Week

By Larry Luxenberg  

You know it’s been a bad week for the stock market when: The market has rallied from down 1,000 on the day to down 600 and you feel relieved that it’s only down 600 points.

But 600 points isn’t bad considering the Dow Jones Industrial Average is down 4,000 points on the week. That’s a record point total but more important, the percentage decline from the peak, about 14 percent in a little over a week, is close to a record decline.

The new Coronavirus is scary and many people have already died and many more certainly will. Beyond that, commerce and tourism have been disrupted around the world and that, too, will get worse before it gets better.

Even worse, no one can even hazard a good guess as to how bad things will get. A worst case scenario is truly frightening and there is good reason why that prospect has spooked investors.

But should the worst case not take place, the markets may have already discounted the economic damage from the virus. In that case, and if the virus doesn’t trigger a recession, the economy may begin recovering some time this year.

For long-term investors (and there is no other kind. Short-termers are speculators, not investors), this panic likely will just be a blip in the performance of the market over their investing careers. Decisions made in panic rarely serve investors well. It’s no guarantee, but the odds favor staying the course, not pulling the plug.

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