Where to start? We went from a virus that was impacting China and named after a beer to the cancellation of major sporting events, schools and public gatherings. We’ve also had travel bans instituted to Europe and multiple state and local governments declaring a state of emergency. It feels and is scary and awful! Coronovirus has invaded the U.S. in the most unwelcome way.
I’m a financial planner, not an infectious disease specialist. I will say what bothers me the most right now is the fact that we don’t seem to have widespread testing readily available. And even if test kits are available, results are often taking 24-48 hours to arrive. From my point of view, this increases the likelihood that someone (particularly in the 15-39 age category), may think that they just have seasonal allergies or a mild cold or flu and continue with their life and inadvertently infect many others. That seems to be the case with the NBA player who was diagnosed yesterday – he was quoting as saying that he actually felt well enough to play last night’s game!
Financial markets HATE uncertainty. They dislike uncertainty more than a teenager hates being separated from their smartphone. Think melt down, lots of drama, weeping and gnashing of teeth! (If you think I’m exaggerating, ask a parent!) Prior to the virus hitting in the U.S., markets had become somewhat uneasy, but life was still “normal”. With the increased number of infections and the President’s address last night, we’ve seen panic reach new levels.
Markets had to take a time out this morning (3/12/2020) and have continued to slide downward. At this level, markets will be down over 25% from the market highs set less than a month ago. Were markets over valued in mid-February? Maybe. But we’ve been here before – not the exact same situation, but markets in turmoil. The dot.com bust in 2000. The real estate and banking crash in 200-2009. In both of these instances, if you’d held tight to your long-term allocation, you wound up okay.
What do I mean by okay and what should you do today? If you’re retired, try to limit unplanned withdrawals from your investment account. In our case, we plan 12-24 months out for our client’s known distributions and have those set aside in very conservative investments. If you’re still working, keep contributing to your retirement plan at work. If you have investments outside of your 401k, keep contributing. The market has just offered a sale of 25% off! Will it go down even more, maybe? However, if your time horizon is over 5 years, stocks offer the greatest opportunity for returns. With the 10-year Treasury under 1%, “safe assets” are not likely to provide a return that will keep pace with inflation.
I’d also encourage you to spend some time NOT watching the news or financial markets. Take the precautions provided by the CDC! However, worrying is not going to help the situation at all. Distract yourself. Watch that Netflix or Amazon series you’ve been hearing about, take a walk, practice yoga, play with your dog, swap your closet from winter to spring, tackle that work project. Whatever it is, I promise that you will FEEL much better. This too shall pass. The key is not to do any long-term damage to your health, either physically or financially in the interim.