When a financial hurricane hits the investment landscape there are very few places to hide. This harsh fact became ever so clear during the first quarter as the coronavirus crisis inflicted devastating losses on stock market investors, the worst declines since the 2007-2009 Great Recession. 

Gold stood out as one of the only safe havens available to investors, posting a gain of 4.1 percent during the first three months of 2020.

Meanwhile, the Dow Jones Industrial Average plummeted 23 percent during the quarter; at its low, the Dow was down nearly 10,000 points or 29 percent.  The Standard and Poor’s 500 Index dropped 20 percent, and small capitalization stocks, as measured by the Russell 2000 Index, lost 31 percent. 

Diversification within the stock market failed to deliver protection: the Stoxx Europe 600 Index lost 23 percent and Japan’s Nikkei stock average was down 20 percent. Even the most defensive sectors of the stock market, recession-resistant businesses like utilities and consumer staples that can maintain revenues during economic downturns, suffered substantial losses. The Dow Jones Utility Average was off 10 percent, while the Consumer Staples Select Sector SPDR exchange traded fund was down 9 percent. 

Gold, hard cash, and U.S. Treasury bonds were the only places to hide during the quarter. And the financial storm is likely to persist for some time. As the quarter ended, the White House predicted the United States could face 100,000 to 240,000 deaths from the pandemic and called for stay-at-home and social distancing guidelines to remain in effect through the end of April. Public health experts say the restrictions will need to be in place longer. 

For investors, the first lesson of the COVID-19 crisis is to always maintain a measure of financial protection. That includes holding enough cash for at least three months of living expenses to carry you through unforeseen emergencies and maintaining investment stabilizers like gold and high-quality bonds in your portfolio, assets that can rise when the stock market goes into a free fall.