Create a Client Letter for March: Calming a Pandemic of Fear

Mar 3, 2020 / By Charles Sherry, MSc
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Give clients an objective, fact-based perspective on the coronavirus and its impact on the markets with this customizable letter template. Then offer guidance on getting started with investing to those who have people in their lives they’d like to help.

Horsesmouth has been offering client-letter templates since 2008. To help you easily customize these letters for your clients, we offer these guidelines for editing and using them. Quick-start tips are below, and you’ll find “Your Client Letter Template Kit,” our complete guide for creating client letters or articles from the templates, in the Resources box below at right.

You can click here to download a Word file of this month’s letter template, which is also shown below for your convenient review.

Resources

Your Client Letter Template Kit
Here’s a step-by-step guide to quickly send your clients a compelling, informative, and personal letter—monthly or quarterly.

Client Letter for February: The SECURE Act—Big Changes to How We Save for Retirement
Review the SECURE Act changes most likely to affect clients with this month’s letter template, as well as touching on the recent uncertainty hanging over the markets due to the viral outbreak centered in China.

Client Letter for January: What Moved the Markets in 2019
Use this month’s letter template to give your clients an overview of the developments that shaped the markets and the economy in 2019, plus set expectations for 2020.

Quick-start editing guide

If you want to use this template as the basis for your own monthly letter to clients, here’s what to do:

  1. Download the Word file.
  2. Save-as using a new file name (so you will still have the original as a backup).
  3. Print the full article from the Word file and complete steps 4 through 6 on paper.
  4. Line-through parts you want to delete.
  5. Note where you want to add or rewrite content.
  6. Note any changes to headlines or subheads.
  7. Open your copy of the Word file (not the original). Using the printed version as reference, delete content first. Then add or rewrite content. Edit headlines and subheads last.
  8. Print out the edited version and proofread it for any typographical errors.

March client-letter template

As February began, most investors were keeping a cautious eye on the coronavirus that was spreading in China. While there were isolated outbreaks around the globe, they were just that—isolated.

Some firms began to back away from prior financial forecasts, but a mistaken belief the illness would be contained to China kept markets at inflated levels.

That changed dramatically when headlines surfaced that the coronavirus had spread to northern Italy, South Korea and Iran.

The good news: new cases appear to have considerably slowed in China as of March 1, according to Worldometer, which combines data from global health organizations.

The illness is spreading in Italy and South Korea. Iran isn’t far behind, but it’s widely believed the economically isolated nation is dramatically underreporting the intensity of the virus.

What’s behind the market sell-off? Driven by computer sell programs that take their cues from headlines, the hit to stocks originates amid anxieties that coronavirus will damage the U.S. and global economy.

When it was contained to China, there were fears that shuttered factories would disrupt the flow of parts that are made in China and are used by U.S. companies. Economists call this a ‘supply shock.’ As the name implies, a supply shock reduces the supply of goods available to businesses and consumers.

Today, there are growing worries that any disruptions to normal routines could also pressure the demand for goods and services, delaying a projected acceleration in corporate profits this year. Economists refer to this as a ‘demand shock.’

Earnings in 2019 are forecast to rise just under 1% from 2018 (Refinitiv). For 2020, profits are forecast to rise 7.7% (Refinitiv, Feb 28). However, as analysts begin to ratchet down forecasts in response to the change in economic sentiment, these recent projections are probably out of reach.

Perspective: Coronavirus and past epidemics

So far, the damage has been contained to the stock market, as the virus has shifted the calculus and created heightened uncertainty. Put another way, heightened uncertainty simply means that the number of economic outcomes has widened. In this case, they are all to the downside.

But, are investors overreacting? Is the public overreacting? The flu has infected 32 million-45 million people in the U.S. this season per the CDC, which began on October 1. There have been 310,000-560,000 hospitalizations, and tragically, 18,000-46,000 deaths. Yet, our daily routine goes on uninterrupted.

In comparison, just 88 Americans have contracted the coronavirus as of March 1. Per the Wall Street Journal, “The new virus is particularly challenging for public-health officials because people who are infected and transmitting to others might have only mild flu-like symptoms, or no symptoms at all, making them difficult to identify.”

Knowing the virus creates only “mild flu-like symptoms” in some people may alleviate some worries. (Of course, the elderly and those with compromised health must be more cautious.)

On the other hand, compared to the seasonal flu, the coronavirus seems to be more contagious and deadlier, despite the fact that confirmed U.S. cases number a fraction of the annual flu.

Health officials do not have a complete understanding of the virus, but our knowledge is progressing.

While we don’t know if this will eventually turn into a significant health crisis, we’ve lived with epidemics before, including the measles, polio, SARS, MERS, H1N1, and the flu, which strikes every year and can be deadly.

During the H1N1 pandemic of 2009 (coronavirus has yet to be deemed a pandemic by the World Health Organization), there were approximately 60.8 million cases, 274,304 hospitalizations, and 12,469 deaths in the U.S. between April 12, 2009 to April 10, 2010. Despite the human toll, stocks were already in the early phase of a bull market.

Today, we’re being pelted by wall-to-wall media coverage of the coronavirus. In 2009, the media may have been more focused on a new president and the Great Recession, limiting the hysteria.

Fear spreads fast, but keep perspective

While we can critique the media and stock market reactions, what we know is that the market has sold off. Fear has spread far faster than the virus. As we enter March, the economy is on a solid footing, and the banking system is in much better shape than 2008.

On February 28, Federal Chief Jerome Powell reaffirmed, “The fundamentals of the U.S. economy remain strong,” but added he is “closely monitoring developments and their implications for the economic outlook. We will use our tools and act as appropriate to support the economy.”

The last sentence is the Fed’s way of hinting that a rate cut or other actions are being carefully considered.

That said, we know that volatility in markets is inevitable, but has typically been short-lived. Stocks seem to take the stairs up and the elevator down. This bout of volatility will end, but calling a bottom is virtually impossible. You and I know that no one has a window on the future.

Once again, I will emphasize that your holistic financial plan incorporates your goals and is crafted based on a number of factors, including your risk preferences and time horizon.

It is a roadmap to your financial goals. It incorporates the inevitable market declines and keeps one from making rash decisions when markets turn volatile. Or, for that matter, when stocks surge ahead and one may be tempted to take a more aggressive but riskier posture.

I recognized that these are trying times, not simply from the vantage point of the investment community. No one likes uncertainty, especially as it relates to our health and the health of our loved ones.

Uncertainty drains our most precious resource: happiness. Turn off the news, get outside, and turn to what brings you peace. I am confident that this too shall pass, and we will be better for it.

If you have any thoughts, questions, or concerns, feel free to reach out to me. That’s what I’m here for. My door is always open.

Key Index Returns
Index MTD% YTD %
Dow Jones Industrial Average -10.1 -11.0
Nasdaq Composite -6.4 -4.5
S&P 500 Index -8.4 -8.6
Russell 2000 Index -8.5 -11.5
MSCI World ex-USA* -9.1 -10.9
MSCI Emerging Markets* -5.4 -9.8
Bloomberg Barclays US Aggregate Bond TR 1.8 3.8

Source: Wall Street Journal, MSCI.com, Morningstar, MarketWatch
MTD returns: Jan 31, 2020–Feb 28, 2020
YTD returns: Dec 31, 2019–Feb 28, 2020
*USD

The basics: How to start investing

In our monthly newsletters, we have addressed a wide variety of topics we believe you will find of interest.

Our goal is to help educate you and provide you with one more way to be in touch with us. If you have any questions about the matter at hand or want to explore an issue in more depth, you have a handy point of contact in your inbox.

This month, we want to take a bit of a different approach, discussing what you need to know to get started as an investor.

If you have a financial plan, are approaching retirement, or are enjoying retirement today, you’ll find these basics to be an excellent refresher, and we are confident you’ll find a number of solid takeaways.

[Please consider including a short message to clients, encouraging them to share this part of the letter with their children, who may be in the early stages of investing or are unsure how to get started. It’s a great introduction for you to next generation investors.]

Remember when you were in high school or college and you were assigned a term paper? I do. Staring at a blank page and writing the first sentence always seemed to be the most daunting part of the project. While I always completed the assignment, I must admit, procrastination always increased my stress level until I buckled down and began the task.

Getting started with saving and investing is similar. You know it’s something you need to do, yet you hesitate. The first step is the toughest, but once you begin, you’ll be well on your way and a weight will be lifted from your shoulders.

Set a goal

First of all, before you begin to save, you must come up with a goal, which is our ‘why’ or reason to save. Think about it. Why should you sock money away, when you could enjoy it today?

If you are saving just to save, it’s easy to get knocked off track. Years ago, I had a friend who saved $300 per month in what he called his “go to hell” fund [feel free to change the name if you feel it’s not appropriate for your clients, or include your own example, but I think you get the point]. There’s nothing like having a cushion to fall back on just in case.

Others may want to save for a down payment on a home, retirement, their kids’ college education or something else. Goals are personal, but they keep you focused on the end result. If you have a goal, you’re more likely to keep at it when hurdles inevitably arise.

Understand why you are doing without today so you can achieve something better tomorrow. If not, it’s too easy to get sidetracked.

Be a student, get educated, and act

Know what’s required to become a successful investor. There are a number of reputable sources available. Or simply reach out to us and we would be happy to make an outline available to you.

Dig into the basics. You probably understand what a savings account is, but what is a stock, a bond, a mutual fund, and an ETF (exchange-traded fund)? These securities will make up much of your savings plan.

Design a plan and implement that plan. This takes effort. But at this point, you’ve moved well beyond square one.

Please be very leery of get-rich-quick schemes or loading up on unknown companies that promise riches. For every Amazon or Apple, there are thousands of companies that fail to get out the starting gate, leaving investors holding worthless paper.

Understand the importance of diversification. Investing comes with risk, but risk can be managed. You don’t want all of your eggs in one basket.

Recognize that day-to-day volatility is inescapable, but running to cash when uncertainty arises comes with a trade-off: your longer term goals.

If you veer from your investment plan, you’ll be putting your goals at risk by accepting a diminished return over a longer period.

Realize that a well-crafted investment plan tailored to your goals incorporates the inevitable pullbacks in the market.

Are you ready to get started? Are you ready to commit? The sense of satisfaction you’ll experience once you’re underway will be enormous.

If you have additional questions, we’d be happy to get you pointed in the right direction. Just ask. That’s what we’re here for.

Charles Sherry, M.Sc. is an experienced financial writer with a passion for exploring the markets and enhancing client communication. In his 25 years in the industry, he authored the Schwab Market Update and works extensively with financial advisors. Charles provides engaging and timely content for newsletters and blogs that help advisors connect with clients and increase their visibility. Learn more at www.financialjumble.com or contact him at charles@financialjumble.com

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