Stay Calm During Market Volatility: Coronavirus

From the desk of Ali Criss, CFP

As I woke up this morning, I let out a sigh of anxiety wondering what kind of stock market & world I was walking into. I powered up my laptop and started reading through articles about the Coronavirus…where has it spread?… how many lives has it taken? Next, I took to looking at the stock market…were we on upswing after last week’s volatility & the FED decision to make an interest rate decrease? Or were we continuing down the correction path as uncertainty of a virus stressed investors?  My overarching concern landed on our clients. Are clients getting worried about their money and the market? How can I address this time in history with confidence that we have a plan that is going to be successful?

All of these questions led me to realize that I was making the prime investing mistake I coach clients in everyday. Do not become emotional.  As human beings, we inherently worry & at times allow our feelings to direct our decision making.  The purpose of having a plan & sticking with that plan during times of distress allows us to have confidence we are making solid decisions.  During times of anxiety, it is important to look at your plan, remain calm and, if needed, re evaluate to have continued assurance in your direction.

Take a moment to consider the following to stay calm during market volatility:

Market downturns happen frequently but don’t last forever

Table with a headline “Market downturns happen frequently but don’t last forever” that shows the average frequency and length of market downturns in the S&P 500 from 1950–2019. Declines of 5% or more occur about three times per year and average 43 days in length. The last one occurred August 2019. Declines of 10% or more occur about once per year and average 112 days in length. Declines of 15% or more occur about once every four years and average 262 days in length. Declines of 20% or more occur about once every six years and average 401 days in length. December 2018 is the last time a decline of at least 10%, 15% or 20% occurred. Sources: Capital Group, Standard & Poor’s. Average frequency assumes 50% recovery of lost value. Average length measure market high to market low.
  • Look to past historical virus outbreaks for data on markets rebounding
The chart shows that global equity markets have navigated through seven major viral outbreaks from 2001 to 2020, including SARS, the Avian flu, the Swine flu, MERS, Ebola, Zika and the Wuhan coronavirus. Global equity markets are represented by the MSCI All Country World Index. Sources: Centers for Disease Control and Prevention, RIMES, MSCI. Data as of March 2, 2020. Chart is shown on a logarithmic scale. Total return index levels in U.S. dollars, indexed to 100 on December 31, 2000. Disease labels are estimates of when the outbreak was first reported.
  • Your investments are for the long term / Stay the Course

If you are diversified and your investments are positioned in line with your risk tolerance, you are set up to weather investment volatility. Chances are you are not taking all of your money in one or even four years so you have time to recover from a market correction.  Remember, you have a plan in place so now is the time to stick with your plan.

Each investment situation is different, so if you need to reassess contact your investment advisor to affirm that you are in the right investments for your age, risk tolerance level & timeline.

  • Re-evaluate your plan

If you have had any recent life changes, are nearing retirement or are taking a higher distribution rate from your assets it may be a good time to re evaluate your plan to make sure you are prepared for a market correction.

Short term cash needs in the one to three year time horizon should be evaluated at this time as it may be wise to put them in lower risk asset classes.

  •   Temper your Emotions

Acknowledge you are an emotional being and that it is alright to have feelings of anxiety during market drawdowns. Have confidence that your plan will weather the storm & you will see blue sky on the other side. While we cannot predict the future, or know where the markets will take us… we can establish a solid plan & make steps to stay true to our course of direction.  As always, feel free to reach out to me with any questions or comments.

Blue skies,

Ali