Letter to Investors Regarding Market Volatility and Coronavirus
This past decade has brought a long and strong bull market. Recent smooth sailing makes headlines of the past week even more jarring. Some of the eye-popping point movements can rattle even the most seasoned investor. It’s uncomfortable!
As financial advisors who entered the industry only months before the financial crisis in 2008, we are particularly sensitive to investor psychology and concerns over market volatility. It is very easy to get spun up in the splashy narrative designed to keep you watching through the commercial break. We’re surrounded by talking heads making predictions, telling you what’s broken and who is to blame. What’s less available is perspective and information helpful to long-term investors planning for retirement. So, where do we go from here?
1. Know that we’ve been here before. Market corrections are common and a natural part of market cycles. We enjoyed an excellent market in 2019. The S&P 500 posted a return of 31.49% last year. Thus, the markets began 2020 at high levels, ripe for a pullback. The New York Times did some nice reporting last week on the past 20 years, and how there have been 10 market corrections of 10% or more. The most recent correction was in December of 2018. Market corrections are common and can occur even in positive years. They are not always indications that something worse is to come.
2. Avoid dangerous thinking that can lead to emotional decision making. “This time is different” and “It’s unprecedented”. These seem like “true enough” statements, but the fact is that every time is different, and it always has been. Every market correction has a catalyst. This time it is Coronavirus. Over its history, the U.S. markets and economy have endured many challenges. The one constant is that they have been able to adapt and move forward.
3. Avoid overconsumption of “market news entertainment”. Watching minute by minute market movement is tempting, but it isn’t helpful (and it’s stressful). Who needs more stress? No one! Invest your time where it counts – with family, friends, and your passions.
4. Don’t focus on predictions. It is impossible to predict the impact that Coronavirus will have on the world economy. The markets are working through this information now. What we know for sure is that data will continue to come out and the markets will process that information in real-time. Long story short, expect more market volatility as this evolves. No one can predict the future. Just try to see today clearly.
5. Focus on principles. The sensible investing concepts that have built your foundation over the years are still key. In fact, they are more relevant than ever. Revisit your goals, write them down. Remember that things like quality, diversification, timelines, and purpose matter! If you have a plan, fall back on it. If you don’t have a plan, let’s fix that.
6. Volatility can create opportunities. As a wise investor often says, be fearful when others are greedy and greedy when other’s are fearful. Those with cash on the sidelines may find opportunities to put those funds to work. If you’re fully invested, market peaks and valleys are good times to rebalance your portfolio (selling what’s up and buying what’s down). Staying invested in your plan is important as the bad days are often followed by some of the best.
Most importantly, you are not alone! Always remember that you have advisors at Vista Wealth Group that care about you and are here to help, especially when the road gets rough. If you have questions or concerns, we’re always glad to talk!
Eric Jones & Sherman Tegtmeier, Financial Advisors
Vista Wealth Group
11235 Davenport St Ste 109 | Omaha, NE 68154 | 402.339.4800
312 E 7th St | Logan, IA 51546 | 712.644.2710
Securities offered through J.W. Cole Financial, Inc. (JWC). Member FINRA/SIPC. Advisory services offered through J.W. Cole Advisors (JWCA). Vista Wealth Group and JWC/JWCA are unaffiliated. Non-securities products are not offered through JWC/JWCA. Neither JWC/JWCA or Vista Wealth Group offer tax or legal advice and this information should not be considered as such.