First, we want to thank our clients for not panicking about the current situation related to the coronavirus. That tells us that you understand the nature of events that can have short term effects on the markets. It also tells us that you understand your own level of exposure to the market.
There is still much unknown about coronavirus and as you know the market doesn’t react well to uncertainty. In times of uncertainty it is always a great opportunity to review your financial health PRIOR to any event that creates significant market volatility. As a client of Quartz, you have heard us preach for years about the benefits of owning individual bonds. While understandably a boring topic, it now should be crystal clear why bonds are an important component of your portfolio.
Prior to this event, your long- term financial plan and investment strategy was created according to your own financial needs and projections, coupled with your specific tolerance and reactions to short term market volatility. Those long- term goals have not changed in a week and neither should your strategy. Remember that prior to coronavirus, markets sat at all- time highs, interest rates were and still are low, unemployment is at record lows and corporate earnings reports have been positive.
Remember that prior to this event, the market was consistently reaching all- time highs and most portfolios were in the mid to high double digit returns in 2019. Also keep in mind that while Monday’s selloff was the third largest point drop, it was only the 254th largest from a percentage standpoint*.
If we look back at recent history we know that past viruses led to market overreaction and created significant buying opportunities along the way. Over a 38-day trading period during the height of the SARS virus back in 2003, the S&P 500 fell by 12.8%. During the Zika virus, which occurred at the end of 2015 and into 2016 the market fell by 12.9%. There are other examples, but they all passed, and the market recovered and hit new highs.
Rest assured, we are not taking this virus lightly and understand the short- term effects it is currently having on the market. We are diligently reviewing this short- term effect to understand any long term effects it could have and will react accordingly if and when necessary.
If you would like to talk to us, please don’t hesitate, we are here for all of you and we will not panic.
David and Shane
- Source: Quartz Financial
- Source: First Trust Portfolios