We want to take a moment here and update you on our thoughts related to the coronavirus and its impact on the financial markets, and, ultimately, on your personal financial situation.
Going into this New Year, many stock markets around the world were trading near all-time highs including major indexes in the US, Canada, UK, and Australia. In fact, since the end of The Great Recession in 2009, many stock markets around the world have seen their prices double or even triple in price. In the US, for example, the S&P 500 index, a broad measure of the stock market, saw its price increase from under 700 in March 2009 to over 3,300 this month, according to data from Yahoo! Finance.
Of course, markets don’t go up forever. Sometimes, they just flatline for a while as company earnings catch up with stock price valuations. Other times, they see violent drops that make big headlines, like the “Black Monday” stock market crash on October 19, 1987 that was felt around the world.
Today, the coronavirus is triggering a stock market selloff around the world. As of this writing, major market indexes in the US, Europe, Japan, and AustraliaAustralia are down 10% or more from recent all-time highs, according to The Wall Street Journal.
Top investor Warren Buffett famously wrote, “It’s only when the tide goes out that you learn who’s been swimming naked.” Well, the tide is going out. The good news is, as stewards of your financial well-being, we prepare for situations like this even though we never know what may trigger them.
Be Mindful of Your Own Behaviors
You’ll notice common investor behaviors coming to the surface with the unfolding virus situation and its possible impact on you and your financial situation.
Fear is a natural reaction. We’re human and as humans, we’re hardwired to react to situations that threaten us. In this situation, we have a double whammy of fear. There’s the virus that can cause us bodily harm and the market reaction that can cause us financial loss.
Your reaction to the financial markets is something within your control. We know it’s no fun seeing your portfolio drop. We also know market volatility is normal and expected. The key is to zoom out and look at the long-term big picture.
Your investments are designed to support your long-term objectives, not today’s needs. Just like in farming, where we know there will be some lean years when Mother Nature doesn’t cooperate and other years when there’s a bumper crop, the financial markets are similar. Financial markets react to shocks to the system and we are seeing one now.
The headlines are scary and they can bring our “fear” instincts to the surface. We believe the best response is to acknowledge what you’re feeling, reach out to us if that would be helpful, and have confidence that we are on top of the situation.
Keep in mind that in the short term, market movements can be heavily influenced by fear and computerized trading, while in the long term, they tend to reflect broader-based economic trends. As investors, the challenge is to not let the difficulties of the short term prevent us from reaping the potential benefits of sound, long-term investing.
We Are Here to Help
Your financial well-being is our number one objective. We continue to work hard behind the scenes to monitor this unfolding situation and recommend actions as appropriate. If you have any questions, please reach out, we’d love to speak with you.