Grocery Stores and Equilibrium | SJS Investment Services

Grocery Stores and Equilibrium

March 23, 2020

Monday, I ran into a supermarket for the first time since our collective world changed with the addition of the word “Coronavirus” to our lexicon. I was struck by certain sections of the market:

  • organic produce,
  • rice,
  • beans,
  • bottled water, and (of course)
  • toilet paper

They were decimated by nervous shoppers. Many times in my life I’ve experienced similar “runs on the grocery store” when weather, terrorist attacks, past pandemics, and other “exogenous” events occurred. Our limbic (fight or flight) brains kick in to protect ourselves, and we behave in a way that may seem irrational to a casual observer.

At that moment in the supermarket I felt a strong parallel to the stock market, where nervous investors have decimated many sectors of the market as their limbic brains have triggered a “sell everything” reaction to recent events. And while I understand the desire to act on these emotive responses, my experience tells me that this can be a mistake.

I have seen these emotions and corresponding behaviors before. Notably in 1987’s “Black Monday”, 1998’s “Asian contagion”, 2000’s “tech wreck”, 2001’s “9/11”, and of course the 2008/2009 “great recession”. The “why” behind these stock market routs occurred were all different, but what made them similar was FUD: Fear, Uncertainty, and Doubt. And the collective response of investors led to steep market declines. But ultimately, in every case, an economic recovery led to higher markets.

And while this time could be different, the risk I believe we will simply have to endure once again is “how long” will the current reality last? Nobody knows for certain, but I personally envision a time in the not too distant future when the supermarkets will be well stocked, and order will return to the economic system and the stock market.

As human beings, and Americans, we have a history of navigating uncertainty and innovating our way through challenges. I believe we will get to the other side of the COVID-19 challenge together and grow through the process.

Good health and safety to you and your loved ones in the meantime.

Very truly yours,

Scott J. Savage

Founder & CEO