"I bet you didn't anticipate THIS!" I heard this from a few clients when Covid-19's ramifications hit early in 2020, but it wasn't the first time in my career I have heard that comment. I heard it after the tech bubble correction, again after "9-11", and after just about every presidential elections, to list a few of the times I have heard "I bet you didn't anticipate this", often followed by "This time it's different."
Frankly, I did anticipate the tech bubble, just not its timing. As for the others, I didn't know those specific events would happen, but I didn't need to. Here's why: While the cause of major disruptions almost by definition cannot be predicted, the consequences to the capital markets bear enough similarities so as to be virtually predictable; at least predictable enough to minimize if not immunize portfolios from significant permanent damage. Real (permanent) portfolio damage often occurs when the investor was too greedy (i.e. concentration risk) prior to the disruption or reacted emotionally after the disruption takes place.
2020 has indeed been…different, shall we say? But the volatility it brought to bear on the capital markets mirrored volatility caused by previous crises. And like before, high quality, balanced portfolios should weather this storm, too.