Panic and Run!
When my daughter was young her favorite show was a Disney cartoon called “The Lion Guard.” In one episode, the Lion Guard was trying to help a zebra whose herd was under attack by some hyenas, and the zebras’ reaction was to panic and run. I can still see my daughter dancing around the house singing, “Panic and run, panic and run!” – which also describes the markets in the first quarter. From the first attacks on Iran on February 28, the S&P 500 fell approximately 5 percent by quarter end. On February 27 (the day before the attack), the ten-year U.S. Treasury had a yield of 3.97 percent, and it rose to 4.32 percent by quarter end. So, investors were selling stocks, and they were selling bonds. The German Bund had a yield of 2 percent on February 27 and finished at 3.01 percent. Gold was $5,230 per ounce the day before the attack and ended the quarter $4,586 an ounce. Should I keep going? In times of crisis, all correlations go to one. Diversification is important in the long-run, but it is not a silver bullet. Sometimes the best way to handle a storm is to go through it; knowing what we own and why we own it gives us the confidence to do it.
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