What should you do about the coronavirus and stock market volatility?

Feb 27, 2020 | The Simbul-Lezon Wealth Management Group


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If you are worried about your portfolio, you're not alone. But during stock market volatility, it's important to keep a level head to avoid financial mistakes.

The financial markets have taken a dip this week over fears about the spreading coronavirus, erasing gains from earlier this year. 

Investors are understandably nervous about their money and their health. Human nature causes us all to act out of emotion when our accounts go down. As your investment advisory team, we put your best interests first. We are here to be a support system for you to help you make informed financial decisions that aren't driven by emotion. 

Stay calm

At times like these, it's important to put current conditions into perspective. This is not the first time the market has taken a tumble and it won't be the last. Market volatility has increased in recent years and the media can often make each time seem worse than the last. In reality, volatility does not hurt investors, but selling when the market is down will lock in losses.

Looking at how markets have behaved following past outbreaks  - although no two outbreaks are the same - you can see how resilient markets have been.

Epidemic

Month End

6-month % Change of S&P

12-month % Change of S&P

SARS

April 2003

14.59%

20.76%

Avian Flu

June 2006

11.66%

18.36%

Swine Flu

April 2009

18.72%

36.96%

Cholera

November 2010

13.95%

5.63%

MERS

May 2013

10.74%

17.96%

Ebola

March 2014

5.34%

10.44%

Zika

January 2016

12.03%

17.45%

- Source: Dow Jones Market Data

 

While easier said than done, successful long-term investors know that it's important to stay calm during a market correction. Many events have affected markets in the past but over the long term markets have historically bounced back and investors who stayed the course increased their wealth.

Keep an eye on the situation

The other day we shared a Special Report, Coronavirus contagion: Implications for the economy and stock market, but the reality is that there is not enough information yet to know how the coronavirus will impact the economy in the short and long term. We don't know yet whether the coronavirus fears will translate into an official correction, but the risk always exists. It's possible the virus will soon be well-contained and the markets will recover. But it is also possible that the virus will spread and further impact global markets. 

It's important to remember that markets dislike uncertainty. As you've heard us say before: The markets are not intelligent, they are emotional at best. 

With so much uncertainty over how fast the virus could spread and the potential impacts, volatility right now is extreme. As more information comes out, it is likely that day-to-day market fluctuations will decrease. 

Remember that your portfolio is diversified

We understand that volatility and market declines are stressful. However, we encourage you to keep in mind that while the stock market may be down significantly, your portfolio is well diversified and holds assets that are designed to work together to decrease overall losses. It's important to consider your specific portfolio, investment time horizon, and circumstances when reflecting on economic events.

If you have questions about your portfolio, do not hesitate to contact us. 

We're here for your friends and family

If you have friends or family who need help with their investments, we are happy to offer a complimentary portfolio review and recommendations. We can discuss what is appropriate for their immediate needs and long-term objectives. 

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