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Yesterday I went to Costco with my wife to pick up a few items. That experience leads me to believe that any sort of economic recovery may take longer than we hope. This impression was not due to what people were buying, but how they acted. The psyche of the consumer has been damaged.
Don’t Talk or Make Eye Contact
Upon entering we were given a cart that was freshly sanitized by a Costco employee – a nice touch. There were people shopping, but I wouldn’t say it was busy. One thing I noticed fairly quickly was how silent it was in Costco. It was worse than a library; it was like I was at a funeral parlor. It felt as if any communication was an act of irreverence. And the way people looked at me confirmed that feeling.
It was an unseasonably warm day in Minnesota and I was in the mood to barbecue some ribs. I couldn’t find any so I asked the butcher where they were. Because of the natural distance between shopper and the butcher behind the counter, and the extreme silence in Costco, when I spoke everyone around stopped and took notice. My wife said I got a lot of stares and glares. People weren’t happy, they were very uncomfortable that I would ask for help and share a smile with the butcher.
A few minutes later I ran into a member of our local church congregation that I hadn’t seen in over a month because of the social distancing measures. So I chatted with him for about five minutes, asking about his work, family etc… As people walked by, I got stares as if I were breaking the law. I was at a distance and socializing with someone I care about, which was physically and mentally healthy. But it was not appreciated by others. The other shoppers preferred I were silent and somber, just like them.
Fast forward a few minutes and I accidentally swallowed wrong – so I needed to cough a few times. “Oh my gosh” I said to myself. “Please don’t cough, please don’t cough.” If there is anything worse than talking to someone while shopping, it is coughing. The entire ordeal was very uncomfortable even though everything I did was normal, natural and healthy. This is what I mean when I say our psyche has been damaged.
Getting Back to Normal
So what happens when restrictions are eventually lifted and restaurants and social events are open? While it has only been a few weeks of lockdown, the psychological change of social distancing and trying to avoid a virus is significant. Our “new” behavior is unlikely to change just because restrictions ease. There may be an initial spike of activity, but without a vaccine or ability to avoid the virus, most people expect to act cautiously.
The stock market has already bounced off its lows, but is yet to be seen if it will hold. Our hope increases when we hear that curves are being bent, medical supplies are increasing and we are progressing with vaccines. However, we are not out of the woods. We don’t know if this will come back after a period of flattening or reduction. Getting back to normal, as we knew it at the end of 2019, may take a long time.
Now Comes The Real Challenge
The sudden economic and stock market selloff occurred so quickly that many investors didn’t have time to do anything. Certainly, some have gone to cash (side note: these are now high liability clients as they have abandoned investing and chosen to speculate instead). Most investors have stayed the course and deserve a pat on the back. But the greatest temptation to abandon the plan may still be in the future.
While history doesn’t repeat, it tends to rhyme. Think back to the financial crisis of 2008. The shock and awe occurred in late September, Congress came with a package in early October and there were many days of significant stock market moves. The market didn’t bottom until five months later when there was no hope whatsoever and people got tired of the ups and downs (mainly downs).
We need to psychologically prepare today. It is wise advice to have a year’s salary saved as an emergency fund. That isn’t because you plan to use it or want to use it; it is simply prudent planning. We don’t know what the market will do from here. But it is prudent to psychologically plan for very difficult times, oscillating between hope one day and despair the next day…and for that to continue for a long time.
The constant ups and downs can exhaust any investor. It is torture. It can influence the best of investors to throw in the towel and give up. These are the times when you (as a financial advisor) need to put together a regular, consistent messaging plan over the next several months to help clients ignore the markets and get through this. The messaging shouldn’t be financial pornography (ie. market forecasts/updates). It shouldn’t be curated content or generic marketing library content that may be pretty on the outside, but offers no real help. The messaging needs to focus on teaching correct perceptions, reinforcing realistic expectations and lots of empathy.
Related: Delivering a Consistent Message in YoYo Markets
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Schedule a call to discuss how behavioral principles can be implemented into your communication plan.