INVESTING WITH CLARITY® BLOG

April Showers Bring May Flowers

May 27, 2020 9:40:26 AM

According to Wikipedia, “In parts of the Northern Hemisphere, an April shower is rain during the month of April. One of the major causes of the often heavy downpours is the position of the jet stream[1]. In early spring, the jet stream starts to move northwards, allowing large depressions to bring strong winds and rain in from the Atlantic. In one day, the weather can change from springtime sunshine to winter sleet and snow. The track of these depressions can often be across Ireland and Scotland bringing bands of rain followed by heavy showers (often of hail or snow) and strong blustery winds.

The proverb March winds and April showers bring forth May flowers, first recorded in 1886, and the shorter, trochaic version April showers bring May flowers (originally "Sweet April showers/Do spring May flowers", part of a poem recorded in 1610) are common expressions in English speaking countries.” We can think of no better saying that can best describe the recent dramatic changes in the global equity markets than this simple and common saying.

As of the drafting of this piece, the S&P 500 fell 35.5% between February 19th and March 23rd, only to recover nearly two-thirds of its drop and stands only 15% away from its all-time high. Just as people lament the sporadic weather patterns in the Northern Hemisphere during the dingy and gray days of March and April, they do they same during market drops, when in fact they should be doing just the opposite. Just as astute florists know the best time to plant seeds for growing flowers is in the midst of stormy weather (April), as they do well with the cool weather providing a late-Spring bloom (i.e., the end of May), so do judicious money managers who operate with a sound investment philosophy and strategy.

As we heard the financial press ringing the bell of destruction with evocative words such as worst, ugly and brutal in describing the current state of the economy, sound investors with acute tunnel vision plowed through this rearview mirror-looking data and instead focused on the future. Prudent portfolio managers operating under clarity realize that whenever prices of sound businesses drop 10%, one better be developing their shopping list of great companies they want to purchase. When that meter drops to 15-20%, you begin the process of buying your favorites. And even better opportunity occurs, which occurs very rarely, is the 25% or greater drop. This gift allows you to completely revamp your current portfolio and get a once in a decade opportunity to own everything you have always wanted but before the drop, refused to pay such hefty prices.

Just as seeds are planted in the midst of nasty weather under the premise that they will bring forth one of the most beautiful things in God’s creation, a flower, so do investors who operate under clarity look to buy great companies, not after the good weather has already come, but in the middle of the worst part of the storm.

April Showers do indeed bring May flowers, and so do investors who, in the midst of the storm, pounce on the opportunity to buy great companies at tremendous discounts. 


Chuck Etzweiler

Chuck Etzweiler

MBA, CIMA®, CFP®, CMT, Chief Research Officer & Senior Vice President

With more than twenty-five years of investment industry experience, Chuck directs the on-going research efforts of the firm, much of which help both advisors and clients understand the philosophy and strategy of Nepsis, Inc. in a deeper manner. A high percentage of the focus of the research is centered around money manager pitfalls, investor short-comings and repetitive behavioral biases that detract clients from earning optimal returns.

Prior to joining Nepsis, Chuck worked as Chief Market Strategist for True North Global Research and as a Securities Analyst with both Wells Fargo and the Bank of Hawaii. Additionally, Chuck has earned the CFP designation and is a Chartered Market Technician. Chuck is a graduate of Syracuse University and also has earned his MBA in Finance.

Chuck is an active member of the CFA Society of Minnesota, the Market Technician’s Association and the Investment Management Consultants Association.

Chuck was raised in Allentown, PA and now lives in California with his wife and two sons.

Email: cetzweiler@investwithclarity.com

 

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