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In the midst of the global pandemic, unemployment levels not seen since the Great Depression, and civil unrest with riots in most major US cities, the stock market has been rallying. This would seem strange and difficult to understand unless viewed through the prism of what really drives market prices.

If the Coronavirus’ effect on the markets has taught us anything, it’s that every single person reading this should start the process of creating an emergency fund. This is not just an idea, nor is it a savings account, but rather, it is a separate pool of money to only use in emergencies.

The answer is MAYBE. It depends upon the outcome of a mighty battle that surprisingly is not focused on the medical progress regarding Covid-19. Although the virus is unquestionably the underlying cause of the problem, interest rates, money creation and corporate earnings are the focal points of this conflict. Federal Reserve policy regarding interest rates and QE – the injection of enormous amounts of money into the financial system – are on one side and the sharp decline of corporate earnings are on the other. It’s the Fed and TINA vs. bad corporate earnings.

Riding the highs, and experiencing the lows, it is the way of the investment market. However, what if we told you that the key to sound and quality investing is learning how to keep it cool when the market is in turmoil? In this article, we are going to look at some of the tools that can help you manage your emotions and expectationsduring market uncertainty.

Take some time to relax

The President’s March 31 daily update on the Covid-19 virus included a sobering comment that we should be prepared for two difficult weeks.  Yes, that seems to be bad and even unnerving news, but the silver lining could be that the virus impact may be in the process of peaking out, at least in the New York City area. Getting past the high point of the curve and reaching the downside will be very encouraging to all.

In our previous e-mail communiques, we have focused on the immediate need and a constructive outlook for the future. This one will be different. We will lay out the four essential elements for recovery and our view as to where we are as far as the progress toward accomplishing each of them.

1)     Monetary Policy – This is the realm of the Federal Reserve (Fed). We can check this box because the Fed has committed to unlimited QE (money creation) to deal with the crisis.

This morning (March 23) the Fed announced that they will provide “unlimited QE.”  This means that whatever the government wants to spend to combat the effects of Covid-19 will be backstopped by the Fed. In the 2008-2009 crisis, the world was shocked when they added $3.5 trillion to the balance sheet through QE. Now that seems like “small potatoes” in relation to what they are presently doing.

This may be the attitude of people regarding the promised government stimulus currently estimated to be $1.2 trillion with more indicated beyond that. This mind-set has been putting continued pressure on the economy and the markets. The fact that it is beyond rational makes no difference when fear is the driving emotion. Of course, it would be very helpful if the government would stop the talking and begin distributing the stimulus money – people want to see it, not hear about it.

The markets are behaving as though we are facing the bubonic plague of the Middle Ages which killed between 30% and 60% of all Europeans. Covid-19 is very serious and should not be taken lightly, but it is unlikely to decimate the world’s population. The medical experts seem to be saying that, like most viruses, it will cycle through in a few weeks to a few months. It is dangerous and there have been and will be fatalities, especially among the medically vulnerable, but as a nation and a society we will survive and recover.