As the COVID-19 pandemic rattles investors and the market, Jeffrey Gerson ’85, P’16, a financial advisor and Managing Director of GGM Wealth Management Group at Morgan Stanley, shares the insights of his more than 30-year career in the financial industry.
Gerson is a Family Wealth Director at Morgan Stanley, a Senior Sports and Entertainment Director and the senior strategic advisor for the GGM Group at Morgan Stanley. He has been featured on CNBC as a guest and show host and has been interviewed by the Wall Street Journal, Worth, On Wall Street, Registered Rep and other industry periodicals. He received the 1998 Smith Barney Harry Irvine Award for high ethics, professionalism, and commitment and contribution to Smith Barney, and the 2005 “Portfolio Manager of Year” Award from the Portfolio Management Institute, which he helped co-found. He serves on the Board of Directors of Bethel Woods Center for the Arts.
Gerson, who earned his B.A. in economics at HWS, has been a speaker in the Salisbury Center for Career Services’ Professionals in Residence series, is a regular participant in the Colleges’ NYC Finance Experience, and offers mentorship and career advice to HWS students and young alums.
In a recent reflection posted on social media on 3/23/2020, Gerson looks at the market turmoil and how the economy has rebounded in the wake of past global crises:
“I have been getting asked quite frequently by my friends and family for my thoughts on the markets and other things so here are my thoughts. This is not meant to be the script to the future, but instead some food for thought for those looking for some perspective.
Let me begin by saying I hope you all are healthy and staying safe and that this too will pass and as comforting as that may be, we understand people have a high level of anxiety right now. You cannot turn on the TV, look at your phone or computer or speak to anybody without being bombarded with a reminder that we are dealing with Covid-19. Even the electronic signs on the highway that are traditionally used for traffic updates and Amber alerts just say, “Stay at Home”.
You already know to wash your hands, stay away from each other or to stay home. Virtually every email I have received from the companies we deal with or don’t deal with, for that matter, tell us that they are aware of the Covid-19 virus, they are working from home, we are here for you, and of course stay safe.
Now that we have that covered, I want to share my specific thoughts. Anyone who tells you that they know how and when this will definitely end is likely to be wrong. But I am are willing to take a stab at it and will incorporate decades of experience into an attempt at soothsaying. In case you were wondering, this is also the first time in my 34 years I have used the word soothsaying which proves that even in a long career like mine you can see things that you never have seen before. But please find comfort in the wise words of Mark Twain who said so brilliantly, “History doesn’t repeat itself, but it does rhyme.”
When I started working at my firm in 1986, Wall Street was hot as a pistol. The stock market was up about 20% that year and that continued into 1987 and kept rising through the 3rd quarter that year. The Dow Jones Industrial Average hit an unfathomable high of 2,700 (BTW, last month it hit 29,552). Then in the 4th quarter of 1987 things changed and the market started going down. The Dow Jones Industrial Average dropped 500 points gradually and then 500 more points on October 19th, 1987. It was my first full year working on Wall Street and what a doozie it was (by the way using the word doozie for the first time ever as well). Most brokers, traders and clients were traumatized. Predictions of the economy collapsing, a massive prolonged recession, permanent unemployment, even a depression were all over the newspapers and the TV (there was no internet, thank God). People sold out their depressed portfolios while chanting “this is going to get worse before it ends if it ever ends.” And of course, the oh so familiar comment I am again hearing, “we have never seen this before!”
But nothing really happened except the stock market started rising. In fact, the average annual return over the following 10 years was over 18%. Yes, you read that right, over 18% average return per year over the next 10 years and no depression. Those investors who panicked in 1987 had to live with what became known as seller’s remorse. Instead of buying stocks that were selling at bargains investors previously could only wish for they took on a herd mentality and sold stocks. That turned out to be a horrible mistake. But some of the old timers in my office were advising their clients not to sell, rather to buy.
As I already mentioned, I was new to this investment world and I asked one of my favorite brokers and mentors in my office what he was doing. His name was Rene and was born and raised in Portugal. He said, “Jeffrey, I grew up in a fishing town in Portugal and I spent a lot of time in the fish market there, and a common saying was, ‘Don’t pay attention to the noise in the market, pay attention to the price of the fish’”. Rene continued that he was not selling, the fish were the cheapest he had ever seen, and he was using this as a buying opportunity. Rene turned out to be spot on. The buys he made for his clients that week in October 1987 turned out to be not only gutsy but resulted in some of the best purchases of his career. Like Warren Buffett, the famed investor from Omaha, who made his money as a professional investor, so eloquently said, “Be fearful when others are greedy, but be greedy when others are fearful.” Now ask yourself the question, “are people greedy or fearful now?”
So here we are, 34 years into my career, as I wash my hands for a full 20 seconds, and then turn off the hot water while holding the handle with a paper towel to be safe, I look up in the mirror and see that the old timer is now me. I think back on everything that has been thrown at this country since the 1987 DJIA low of 1,700. The Russia default of 1997, Singapore and Malaysia freezing their currency, the Y2k panic, the unwinding of the Dot Com mania, the tragedy of 9/11/2001, the longest war in American history against an enemy that in many cases walked among us, and who can forget the 2008 Financial Crisis. You remember, the crisis that we were told by the media outlets and highly opinionated and confident friends would lead to a depression that this country would never recover from. In March 2009, the Volatility Index known as the VIX was trading 85-90. It normally trades around 10-15. The higher the VIX, the higher the fear that investors are experiencing. In the last 20 years it has only traded above 60 twice. The first time, as already mentioned, was in March 2009 when the market bottomed and subsequently experienced one of the most heroic rebounds ever seen in the stock and bond markets. The second time was last week when the VIX traded between 85-90. It’s worth repeating the only time other than last week that the VIX reached 85-90 in the last 20 years was also the best buying opportunity in the last 20 years. And here we are again.
I want to leave you with some final thoughts. As of this weekend, there have been over 400 deaths related to Covid-19 and there is no question that there will be more. Our hearts go out to those families. Any death is never something we should trivialize. No one can predict how and when this will end but we have some ideas. The medical community will likely develop a treatment, a cure and/or a vaccine. When that happens, the equity markets will likely change direction and being to move back up or they could move as violently up going forward as they did down over the last couple of months. Call us optimists, call us pragmatic, or call me an old timer but don’t call me to try to convince me otherwise unless you bring your crystal ball to prove it. We’ve seen this movie before, and we will be on our feet applauding when the credits roll.
In the meantime, use your newly found downtime productively, and at the risk of sounding preacher-like, show empathy towards those less fortunate, and be appreciative and thankful to those who are on the front lines like truck drivers, medical and hospital personnel, law enforcement, public transportation workers, and grocery store workers to name a few. If you can assist residents in your building or neighborhood by providing them with an essential need you have access to it will not only provide much needed support, but it will make you feel better as well. And isn’t that what we all want right now? Many of you wish you could be with a loved one who cannot logistically be with, so instead assist the loved ones of others in the same predicament.
My ultimate hero and role model is the fictional character George Bailey, portrayed by Jimmy Stewart in the movie, “It’s A Wonderful Life”. The bank that was overseen by George Bailey was essentially robbed by an evil man, by the name of Mr. Potter. When George realized this, he reached into his own pocket to help his friends and his customers meet their immediate needs. Some selfishly asked for all their money, but most figured out what they actually needed and worked with that. His community banded together, and the town triumphed and was a better place for it.
We should all find comfort that the medical community, the private sector, local government and the federal government are all working hard together on a bipartisan basis much like we did after 9/11.
This is America and we will do whatever it takes to prevail. So, stay safe, appreciate your time locked down with your family for now and don’t panic. Follow the direction of your local leaders and don’t put others at medical risk by being careless. In the words of the author Robert Schuller, “Tough Times Don’t Last, Tough People Do”.
Stay safe, Jeff”
The views expressed herein are those of Jeffrey Gerson and do not necessarily reflect the views of Morgan Stanley Wealth Management or its affiliates. All opinions are subject to change without notice. Neither the information provided nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Past performance is no guarantee of future results.
The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally the leaders in their industry. An investment cannot be made directly in a market index.
Information contained herein has been obtained from sources considered to be reliable, but we do not guarantee their accuracy or completeness.
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