I spent hours in high school investigating dozens of colleges in search of the ideal fit. All the brochures included photos of the campus in autumn (never winter), a football player, and a student intently studying a beaker in a chemistry lab (where have all those chemists gone?). Liberal arts schools added a paragraph about how they helped students become well-rounded (and somehow highly employable?).

At some point in my research, I stumbled across the rare and mystical “J-Term”: aka January term. At some schools, students took a single course for the entire month of January. One class-- all day, every day with daily quizzes and weekly exams. Theoretically, it was a period of intensive focus, study, and frequent testing which enabled students to learn a complex subject much more quickly and completely.

Unprecedented Intensity

Welcome to the financial market’s version of J-Term. We are currently experiencing an unprecedented period of intensity for financial markets and investors. COVID-19 and its implications for public health, public interaction, the economy, and the markets are dominating daily news and web searches. Everyone is now an amateur epidemiologist. It is all coronavirus, all the time.

The markets have reacted in unprecedented fashion. The Dow Jones Industrial Average had its fastest fall into a bear market in its history. March was its most volatile month EVER— by a long shot. How intense is this J-Term class? Nick Maggiulli, a blog writer at Of Dollars and Data, created this January vs. March comparison of daily market swings:

This is A Test

The swings in the market are testing investor psychology, risk tolerance, and discipline. Just when you thought markets could go nowhere but down, they rose. Things have moved so quickly with so many unknown (but critical) variables that many mathematical models are impossible to apply. Thought you knew your risk tolerance? Thought we had hit the bottom? Markets have alternatively rewarded and punished timing bets in the same week!

While we do not know who the big winners (if any) may be, we do know one strategy has been passing the tests: diversification. Those with well-diversified portfolios have seen noticeably smaller losses and are therefore compounding more capital when markets go up.

This won’t go down as our “favorite class of all time”; but what is important is that we apply what we know to be true and make it to the next semester.

See you after spring break!