March 24, 2020


During the 2008 recession, “This time it’s different,” was a common refrain. Many thought markets would never recover and that the end of capitalism was at hand. There’s no doubt it was different from many past bear markets, but that’s true of all market cycles. The causes of each cycle and the depth and duration of the decline vary, but down markets and ensuing recoveries have been happening since before the Dutch tulip futures bubble in the early 17th century. As unsettling as this current environment may be, we will eventually come out on the other side of this. We can look at related events in the past to remind ourselves of this.


In a 2007 paper, the St Louis Fed refers to a future influenza pandemic as a “nonzero probability.”[1] Epidemics and pandemics have occurred throughout history and will, most likely, occur again in the future. The Spanish Flu of 1918 is perhaps the most similar to what we’re experiencing now. However, many of the circumstances are different – including the fact that the world was deep in the midst of World War I. Additionally, that virus hit men between 18 and 40 the hardest, and the loss of a large part of the working-age population to sickness was compounded by the loss of lives to war. What few records there are regarding the resulting economic impact suggest that it was relatively short-lived. We do know that, as we are seeing today, businesses suffered double-digit losses in revenue, particularly those in the service and entertainment industries.


As difficult as it is to do in the current environment, it’s important to maintain perspective regarding the economic impact of this pandemic. There is no doubt that the impact will be negative around the globe; we just don’t know the depth and duration of the downturn. Fortunately, we have a much better healthcare system now than in 1918, even given a potential shortage of equipment and services. Technological advances help us maintain productivity more effectively. And the government has more experience using stimulus to help right the economy.


We’ve spent time getting to know our clients and understand their long-term goals so we can help them achieve those goals. When we develop client plans, we stress-test them for market scenarios just like this. We work to mitigate the impact of these shocks on client portfolios through careful investment planning, buffering our portfolios against downturns while markets are still at peaks. That includes using relatively quiet times to develop our Crisis Playbook, which outlines the actions we’ll take in a sharp downturn – and which we are implementing now. That Playbook includes adjusting our portfolios to take advantage of values that become available during troughs. A client shared this quote from Warren Buffet’s 2016 annual letter:


Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, it’s imperative that we rush outdoors carrying washtubs, not teaspoons.


For now, we are managing our clients’ portfolios and doing what they’ve hired us to do. We will carry the washtub outdoors so that they can focus on their families and themselves and on following the recommendations of the infectious disease experts – as challenging as that may be.


Our team continues to stay in close contact as we work together remotely to mitigate the impact of this pandemic on our clients’ financial well-being. Please don’t hesitate to reach out by phone or email if there is anything you need.


Be safe and be well.



Fulcrum Capital is an SEC registered investment adviser with its principal place of business in the state of Washington. For additional information about Fulcrum Capital please request our disclosure brochure using the contact information above.

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