The Case for Optimism
by Marshall W. Gifford
It is 5:55AM on March 21, 2020. I am writing this from the seclusion of my kitchen at my cabin in rural Northern Wisconsin and honestly feel like a character in a sci-fi movie. I got out of bed this morning, far earlier than I wanted, in response to an overwhelming urge to write to all of you.
I felt the need to write to you from the perspective of the captain of your financial ship and realize for some of you, you may not see me that way as we may only handle a few insurances, or just a small account, or I am just the guy that handles your retirement plan at your office. Regardless of my role, our paths have crossed if you are getting this, and we are all in this together. I wanted to share with you my big picture perspective and what it looks like from the captain’s bridge - what I am using and thinking to navigate the rough waters we are in right now and the thought process I am using to get you safely to your destination. I can state with utter confidence that one option not under consideration is to abandon ship. Staying on the ship during the storm is the only way to assure we arrive safely at your destination.
We are all blessed to live in the greatest country in the world. We don’t have a history of losing battles. We don’t have of history of sustained economic decline. In my opinion, betting against America long term has always been a bad idea. It is natural to want answers to how this plays out. When will we create a vaccine? How long until my business opens? How far will the market drop? How long do I need to stay away from others? We wouldn’t be human if we didn’t feel this way. However, in America, we have a long history of facing challenges, overcoming them, and emerging stronger. Most recently, the 2008 financial crisis was different than anything we’d faced before. The terrorist attacks against our own citizens in 2001 was tragic and different than anything we’d faced before. The dawning of the internet and subsequent bubble and collapse of technology stocks in 2000 was different than anything we had faced before. I could list more, but the point is each crisis seemed to be completely unique while we were in the midst of it. If you go back through history, you see that Americans band together in times of need and emerge stronger and more united. I would draw your attention to just a few events in history that I am using to shape my game plan and provide me with a strong sense of optimism in a time where pessimism reigns. “Optimism is the only realism. It’s the only worldview which squares with the facts and with the historical record.” (Nick Murray)
1927 – First vaccine for tuberculosis. Tuberculosis vaccines saved 58 million lives just from 2000-2018.1
1927 – First tetanus vaccine.2
1962 – First vaccine for polio. America has been polio free since 1979. 2
1964 – First vaccine for measles. 2
1967 – First vaccine for mumps. 2
1978 – Last fatal case of smallpox. Smallpox had a death rate of 30% if contracted and killed 300 million people worldwide in the 20th century. 2
1992 – First vaccine for hepatitis. 2
AIDS used to be untreatable, but with antivirals therapy, people can live long lives after testing positive.
I am confident that with the best people around the world working on this, we will soon have solutions in the form of antiviral medication followed by a vaccine. This will be a temporary situation and there is already progress being made on this front.
On a broader scale, Americans responded with heroic efforts to defend the US and our allies in WWII. With our back against the wall after the horrific attacks at Pearl Harbor, thanks to the help of the intelligence community, the sacrifices of our military men and women, and the private sector, we sank four of Japan’s six aircraft carriers at the Battle of Midway. Our massive public and private efforts made it easier to replace and restock our fleet, eventually leading to an Allied victory. During this time, Ford Motor Company built 86,865 aircraft, 57,851 airplane engines and General Motors produced 119,562,000 shells, 206,000 aircraft engines, 13,000 torpedo bombers and naval fighters, and 97,000 aircraft propellers. Our great nation rose to the challenge.
We see heroes at our local Minnesota companies, 3M and Medtronic, stepping up now. 3M has increased its N95 respirator mask production from 400 million annually to 1.1 billion. Medtronic has increased production of ventilators. Construction workers, dentists, and other medical workers are giving their masks to those on the front lines. This is just the tip of the iceberg on the collaboration in addressing this.
Forty years ago on February 23, 1980 in Lake Placid, NY, during a time of 13% inflation, 14% interest rates, 7%+ unemployment, with gas lines and gas shortages, a group of amateur hockey players from the United States, of which 13 of the 20 were born in Minnesota, provided a much needed emotional boost to an economically struggling nation by defeating the Soviets in the Miracle on Ice. 3 This has nothing to do with today’s concerns but does illustrate how the economy changes over time and that we are a country of winners. It is a pattern exhibited throughout our history.
For historical perspective, on January 1, 1962 the S&P 500, a measure of the value the 500 largest companies in America, was at 69.07. On January 1, 1980 it was at 110.90, on September 11, 2001 it closed at 1092, and as of the writing of this, the S&P 500 is at 2289.62. So, despite all the events over this time period, this gradual increase continues. 4
As tragic as this may be over the next few weeks to months, a few positives I see coming from this are:
- A baby boom.
- A society better equipped to deal with things like this in the future.
- A mobile society with more people working remotely thereby increasing freedom and reducing fossil fuel consumption, while not changing productivity.
- An increase in the shift to cloud-based computing that will allow for more efficient and secure collaboration, allowing more of us to work from anywhere, anytime.
- Family schedules opening, thus allowing more quality time spent together.
For a short period of time, we don’t have to constantly be somewhere with something to do. We don’t have school drop offs and pick-ups, practice for sports or music, concerts, play dates, business travel, and for many, not even the routine of work. We can view all of these as negatives, or we can view them as maybe the only time in our lives where we can spend time with our families without all of life’s usual distractions. This a temporary situation that none of us have any control over. Why not pick up a hobby you’ve always wanted to, start an exercise routine you’ve been meaning to, or call a family member you haven’t talked to in a long time? We are all longing for human interaction. It is futile to worry about something we don’t control, so view this as a time to do something you otherwise never would have had the chance to do and cherish the extra time with your family. We’ll be back to our regular routines before you know it.
They say it always darkest before the dawn. Well, it was dark when I started writing this, but it is not anymore. The sun gradually came up in the same way that life will gradually return to normal, offices will re-open their doors, kids will go back to school, restaurants will once again greet their customers, airplanes will operate at full capacity, and even cruise ships will again sail the seas on a beautiful sunny day. Keep in mind when this happens, assuming our long-storied past is our best indication of the future, the values of the great companies you own in your well-designed, long-term portfolio will be restored. Thank you for reading this and remember, we are all in this together and we will get through this together thanks to those of you serving on the front lines and helping treat those affected by the virus.
Marshall W. Gifford, CLU, ChFC
Founder & Senior Partner*| Founder, North Star Medical Division
Gifford Financial, The MD & DDS Specialists
A Division of North Star Resource Group
2701 University Avenue SE Suite 100
Minneapolis, MN 55414
This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding any funds or stocks in particular, nor should it be construed as a recommendation to purchase or sell a security. Past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. The S&P 500 Index is an unmanaged index of 500 stocks that is generally representative of the performance of larger companies in the U.S. Please note an investor cannot invest directly in an index. 5-2021
1Source: World Health Organization; https://www.who.int/
3Sources: Inflationdata.com; https://inflationdata.com/Inflation/Inflation_Rate/HistoricalInflation.aspx
4Source: Multpl.com; https://www.multpl.com/s-p-500-pe-ratio