Stay the Course – Coronavirus and Stock Market Volatility

According to the CDC, the recent coronavirus (COVID-19) outbreak has claimed almost 5,000 lives and impacted nearly 132,000 people worldwide as of March 12th, 2020.  On March 11, 2020 The World Health Organization has declared coronavirus a pandemic.  Naturally, this crisis has  injected a sense of uncertainty into the markets.  Most of you are invested in the stock market and as a result, you may have found yourself worrying and questioning your investment sanity over the last few weeks seeing the Markets swing widely but mostly downward.   With the Dow Jones drop this week, the U.S. Economy officially entered Bear Market territory ending an 11 year Bull Market. (A Bear Market occurs when the stock market falls more than 20% )

I wanted to take a moment to update you on my thoughts related to the coronavirus, its impact on the financial markets, and, ultimately, on your personal financial situation.

A Brief History Lesson 

While the events of the last few weeks have been stressful, keep in mind that the market’s negative response to the coronavirus is nothing new. The below table shows that since 2003, approximately six months after early reports of a major outbreak, the S&P 500 bounced back by an average of 10.47 percent.  After 12 months, it rebounded by an average of 17.17 percent. 

^{Source: Dow Jones Market Data, cited on MarketWatch.com February 24, 2020.} 

^{*End of month during which early incidents of outbreak were reported}

Why is it important to take a look back in time? While there are no guarantees the current situation with COVID-19 will follow a similar pattern to the above epidemics, it helps us to better understand and put into perspective that historically over long periods of time, despite an epidemic, stocks typically tend to move upward over time. 

What Should You Do? 

1.  Stay Financially calm

 As the chart above demonstrates, all assets rise and fall in value and the more extreme the swing, the stronger the anxiety. Overcoming this market psychology is no easy feat but learning how the market works can help to reduce stress and increase your ability to “stay the course."

As I have often said, your investments are designed to support your long-term objectives, not today’s needs and therefore, money you need now and over the next 5 years should not be invested in stocks. In situations like this, it is important to have perspective and remember that swift market drops are not unusual. Of course, the headlines are scary and fear of the unknown is scariest of all, but the nature of the market is that it will go up and down.

Investing in the the market is not about winning and losing – it’s about your goals, strategy and time frame. The virus and how it spreads is completely out of our control, but our reaction to the financial markets is something we can control. It’s not fun seeing your portfolio drop, But at the same time, we know market volatility is normal and expected. The key is to tune out the noise and look at the big picture:  the money you have invested in the stock market are for your long term goals and over that time frame, stock markets will rise.

2.  protect yourselves and your family

Until a cure is discovered and / or the virus has run its course, Coronavirus is a part of our everyday life.  What makes this virus so scary is that it is highly contagious.   According to the CDC, the people most at risk are older adults and people with chronic medical conditions like heart disease, diabetes, and lung disease.   Until this crisis is over, here are a few things  that the CDC recommends you should consider doing to protect yourself:

• Avoid close contact with people who are sick.
• Avoid touching your eyes, nose, and mouth.
• Stay home when you are sick.
• Cover your cough or sneeze with a tissue, then throw the tissue in the trash.
• Clean and disinfect frequently touched objects and surfaces using a regular household cleaning spray or wipe.
• Wash your hands often with soap and water for at least 20 seconds.
• Follow public health advice regarding school closures, avoiding crowds and other social distancing measures.

For more information on how to protect yourself go to:  on the Coronavirus go to:  https://www.cdc.gov/coronavirus/2019-ncov/protect/index.html

What Am I Doing For You?

There is lot about the Stock Market that is difficult to understand.  However we can be sure is that on any given day the Market will do one of three things: It will go up, it will go down, and sometimes it will barely move at all. The other thing you can be sure of is that your financial well-being is my primary concern. 

While there is a lot of anxiety surrounding the stock market right now, there is a silver lining.  Situations like this can actually create buying opportunities. As prices drop, I  seek out any opportunities to “rebalance” and shift your asset allocation if it aligns with your long-term goals.  

If you have any questions about your specific situation, please contact me.  I am here to help you get through this period of market instability.