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Market Update: April 9, 2020

The grim reality of a health crisis...

As we head into the Easter weekend, I would like to take a moment to recognize those who have been affected most by this health crisis. Our hearts and prayers go out to all of you who have suffered loss, pain and stress during these difficult times. We also want to express a heart-felt thank you to all of those who are on the front lines. We so appreciate your efforts to keep us well in such a dangerous health crisis. You are all heroes!

What is happening to the markets?

The stock markets have had a very rocky 5 weeks but have had a few positive weeks lately. This may seem hopeful in an otherwise frightening pandemic, as we continue to see the illness and death toll climb. What we can tell you is that this kind of market movement can be very normal during a bear market. Please take a look at Chart 1, which illustrates how the markets moved in the last bear market of 2008 - 2009. Since the significant event of letting a major US bank (Lehman Brothers) fail on September 12, 2008, the S&P 500 dropped over 45% to the lows (in the light dotted line) six months later. What you will notice when we overlay the current market (the solid dark line) since the Covid-19 spread to Europe on February 19, 2020, you will notice an unbelievable similarity over a month into this. What is highlighted in peach is the fact that there were 4 different times the markets had very good gains from this point (18% on average). Unfortunately, the market over time (roughly 3 months) dropped an additional 33%. We are not saying that this will happen, but we want you to understand the markets are very unpredictable during severe declines (otherwise known as Bear Markets).

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