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Back in 1987, right after the markets had experienced the famous “Black Monday” decline which took the Dow Jones Industrial Average down by 22.6%, the weekly Barron’s financial publication featured, on its cover, a suitcase with the frightened eyes of a Wall Street broker peeking out of its dark recesses, and an arm reaching out to wave a white flag.
After the worst market week since the 2008 financial crisis, and one of the worst months since the 1930s, that image represents how a lot of advisors are feeling right now. The market finished out a remarkably bad week of negative returns, including consecutive days of 1,000 point drops in the Dow and a February 1-month drop of 7.5% in the S&P 500 index.
But we hope that is not how you’re feeling at the moment. We are paid to take on the worst fears of our clients, and it IS a challenge when unanticipated black swan events rattle the traders who bid stock prices up or down.
If you’re open to hearing the good news, then consider the actual value of the companies that make up the major indices are almost certainly not 10% less valuable today, as businesses, than they were last Monday. The market drop is a panic attack, pure and simple, and real valuations should eventually reassert themselves. The bad news is that neither we nor anyone else has any idea how long the panic attack is going to last. Remember, to date fewer than 100 people have been diagnosed with the virus in the United States.
Even though a lot of attention has been given to the virus’s impact on the markets, the more important issue is the health of you and your family. You—like us—should be closely monitoring the spread of the disease. I read where medical experts recommend washing our hands and using hand sanitizer and cleansing wipes. But heh, you already knew that, yes?
There doesn’t appear to be a test for the Coronavirus at the moment and there is no instant cure or vaccine. In 82% of the cases symptoms require little or no medical intervention, and in 98% of the cases, the disease is not fatal, but it does seem to be most dangerous for those over 80.
Our wish is that you and your family will stay well, and the virus will not become the pandemic that some (including market traders) are fearing. And please understand that we (and everyone else) don’t know what the market will do this week or next. The panic might continue, or we might experience a quick recovery. Historically, the best plan when bear markets present themselves is to sit tight, and our goal for you is to follow the best plan we know and wait for the recovery. This too shall pass.
Andrew Flinton, CFP®
Randy Thurman, CFP®
Carol Alexander, CFP®
Brenda Bolander, CFP®
Chad Rudy, CFP®
Joe Bowie, CFP®