THIS TIME COULD BE DIFFERENT

Inability to contain the economic impacts of the virus may have a lasting effect on stocks.

The stock market lost its bounce, at least temporarily. After a decade-long stock market boom, investors have been trained to ride every dip. They learned the market would soon bounce back and make new highs. But this time could be different.

Why? Because there is no obvious rescue this time. I'm not talking about the inability to contain the coronavirus.

I'm talking about the inability to contain the economic consequences of the virus — not only on corporate profits but in our daily lives as well, in terms of jobs and income.

All of that will have a more lasting effect on the stock market than many expect. Here's why:

Stock prices and corporate profits

Amid the concern over human lives around the world, it is not cynical to take a realistic look at the impact on business profits. It's not just global trade; it's the lack of parts we import for Americanmade products, from autos to drugs, that will cut into American economic growth. If assembly lines cannot function without parts, there will be layoffs. Those layoffs will be staggering, albeit temporary.

The immobility of fear

As I write this, it seems that the growing fear of contagion will influence plans for major outings, from conventions to sporting events to spring break travel. That will have an impact beyond business profits.

It will likely result in temporary layoffs of people in service industries related to travel — everyone from the guy selling beer at a sporting event to the ticket-takers at museums and theme parks. Those people have families who depend on that income to buy groceries and pay rent. The only thing spreading faster than the virus may be the fear that changes our lifestyle.

The Fed and other central banks cannot save the markets this time

There is little that cutting rates can do right now to stimulate the economy. The half-percentage-point rate cut last week won't incentivize businesses to expand or consumers to buy houses when the economic headlines already were bleak. Plus, rates were already so low that the stimulus is likely to be more psychological than practical.

Bear in mind, this is not the end of the world scenario that many doomsayers are painting. But this is likely to be a different market reaction than most recent market participants have seen. The question is not only how low the stock market can go, but how long a market decline can last.

Both are hard to predict — and that's not my job or yours. As individual investors we must look at our own personal situation, our risk tolerance, our need for liquid cash for living expenses. It's a Savage Truth that the stock market has never been easy — especially when it looks easy. The market always fools the greatest number of people (another Savage Truth).

In my lifetime I have seen three bear markets that approached or exceeded 50% declines: the 1973-74 crash, the 2000 dotcom bubble burst, and the 2008-2009 financial crisis. I've learned to respect the fact that the market can go down — and stay down — for longer than most people expect. I'm reminded that the Dow Jones Industrial Average soared over 1,000 in 1972. After collapsing to below 600, it was still below 1,000 a decade later in 1982.

This is not a prediction. The simple fact is that despite those bear markets, over the long run — at least 20 years — a diversified stock portfolio with dividends reinvested has always given a positive return, even adjusted for inflation. So, if you're not in or near retirement, please keep investing on your regular schedule of 401(k) or IRA contributions. Retirement is a long way off.

But if you're near or in retirement, this is not a question of predicting market direction or timing. It's a question of the impact on your life. And that's The Savage Truth.