The Price of Panic

I was recently looking at a heartbreaking website called The Price of Panic, which presents a non-politicized aggregation of articles and data from around the world on the non-monetary costs of the

governmental response to COVID-19. It is a multifaceted view, spanning Hunger and Poverty; Death from Other Diseases; Harm to Children; Anxiety, Depression & Suicides; and Oppression. Regardless of the category, the sum is the same – a tragedy of incalculable scale is occurring. In the crusade to limit the toll of the virus, policymakers are reflexively substituting one crisis for another, arguably even more existential crisis. The media adds gasoline to the flames, because bad news is good news and because a frightened viewer is a loyal one.

There is no objective more worthy than saving human lives, and no credible person could claim that COVID-19 is not a grave threat. A threat like this demands that we work together and make sensible sacrifices where we can in our lives.

However, the argument that The Price of Panic makes is that the sacrifices created by a global lockdown are not small and must not be dismissed. Policymakers cannot act as though their policies have no cost beyond the immediate financial impact. The reality is that policymakers face a balancing act between saving lives and saving livelihoods, and that the cost of lockdowns is devastating to humanity. These costs have to be incorporated into any and all policy decisions, especially those that are intended to help save lives.

For years, we have been talking about the price of panic in the context of the impact to long-term investment returns caused by moving to cash even for a short period of time. I wrote an article in September called "A Neutral Position" that discusses this very perspective. That kind of fear-driven investing error comes from a similar place: trivializing the cost of the "solution". We have all felt this fear, and we have all performed some version of the cost/benefit calculation for ourselves. We have learned that the cost of panic can be devastating to an investor's long-term outcomes.

However, it occurs most often on the individual level and impacts an individual's finances. The new context that COVID-19 and 2020 have given us for the price of panic is a whole different life-and-death level. Although it is not at all the same thing, we can see the seed of global governmental policy in ourselves, and when we see it translated to a civilization-wide scale, the result is terrifying and tragic.
In March, few would have foreseen that the world would still be grappling with these difficult choices during the holiday season. Many people in our community have suffered the financial impacts of the virus and the lockdown, but everybody has seen their lives changed. At the same time, we have all learned how little short-term market volatility matters in the scheme of things, and how important it is to stay focused on the things in life that matter most, especially our families and the important people in our lives.

As Thanksgiving approaches, I wanted to remind you that we are here to help you handle whatever changes this year has brought; that as the stewards of your financial plan, the team at Acadium considers the multifaceted costs and benefits of every decision in your portfolio and plan; and that I am profoundly grateful to have this responsibility to you.

Frank Hujsa, CFP® , CLU®

Partner, Acadium Financial Partners
Financial Adviser, RJFS
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O 772.370.1143

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