February 28, 2020

There’s no way to sugarcoat it – stocks just had their worst week since the financial crisis. Most stocks are officially in correction territory, meaning down over 10% since their recent highs. The uncertainty thrown into the global economic outlook from the coronavirus is the culprit of this mess. And unfortunately, it will most likely be a while before we do get any certainty there, which means more stock market volatility. Which in turn can create a lot of anxiety for investors.

As we said in our related coronavirus blog earlier in the week: humans are not wired for disciplined investing and usually trade poorly based on fear. It’s times like these when we are here as your financial Sherpa to remind you to “STAY THE COURSE”. The market will recover just like it did after the great financial crisis and the twelve other major disease outbreaks in the last 20 years. Further, our clients’ portfolios aren’t 100% tied to the stock market and take on a balanced approach. Fixed income and alternatives are asset classes that can behave quite differently and help cushion the blow in a snap-pullback like this.

For more insight, please read this very informative article about the coronavirus and market declines put out by Dimensional, an investment company home to renowned professors Eugene Fama and Kenneth French. We’d like to highlight the following excerpt from that which is: “We can’t tell you when things will turn or by how much, but our expectation is that bearing today’s risk will be compensated with positive expected returns. That’s been a lesson of past health crises, such as the Ebola and swine-flu outbreaks earlier this century, and of market disruptions, such as the global financial crisis of 2008–2009. Additionally, history has shown no reliable way to identify a market peak or bottom. These beliefs argue against making market moves based on fear or speculation, even as difficult and traumatic events transpire.”