The Coronavirus Has Infected the Stock Market…Now What?

With the coronavirus now spreading across over 100 countries, it is clear the effects from the virus are widespread and significant. In attempts to mitigate these effects, entire countries have implemented quarantines, multinational corporations have instituted “work from home” protocols in various cities across the globe, and people everywhere have started to accumulating various dry grocery items, cleaning supplies, water, hand sanitizer, etc. to prepare for their own potential isolation from the outside world.

It is no surprise, then, the coronavirus has also infected the stock market, causing the first trading halt since 1997 and the worst day for the market since 2008. This has investors and traders alike to ask themselves if they should be doing something to better position their portfolios for whatever remaining impact the virus will have on the world. Below are some thoughts we at B&C Financial Advisors are sharing with our clients during these turbulent times.

Don’t Panic

This is a phrase you are bound to hear often (if you haven’t already), and it applies as much to your finances as it does to your health. Making rash decisions about important aspects of your life rarely turns out well. Panic buying at your local grocery store can cause food and water shortages; panic selling the stocks in your portfolio can cause you to miss out on the gains typically seen after a market correction. Consider the fact, in the one-month period following the day (March 9, 2009) the market bottomed out during the Great Recession, the S&P 500 increased in value by more than 25%. Now, imagine you had sold out of the market on March 9th in a panic to limit your losses.

Remember the Long-Term Plan

You hired us to look after your investments over an extended period of time, whether it’s money you intend to live on during your retirement years, investments that will provide support for your children’s or grandchildren’s educations, or assets you intend to leave to your heirs. As part of that process, we discussed your current (at the time) financial situation, your financial needs and goals, and your appetite for risk. From those conversations, we arrived at an agreed-upon asset allocation designed to meet your long-term goals, regardless of any short-term market fluctuations that may occur along the way. We also suggest revisiting this plan at least annually to ensure the appropriate amount of risk is being taken, always keeping the end goal in sight. While it is possible the effects of the coronavirus may get worse before things get better, it is not likely to have a long-term impact on the plan we have built for you.

Be Proactive, Not Reactive

Coinciding with the first two ideas is a founding principle of our investment philosophy at B&C Financial Advisors. We do not pretend to know what the market will do a week, a month, or a year from now. Knowing what we don’t know allows us to build and manage your portfolio from a perspective of protection and longevity. This perspective guides us toward an investment management process in which we sometimes act contrary to how many people view the market. We proactively take gains as stocks increase in value (to not give those gains back when the market inevitably corrects) and buy stocks as they lose value (so long as the fundamentals of the company remain strong). Additionally, part of adhering to your asset allocation includes building a fixed income portfolio with laddered maturities, meaning bonds come due periodically, giving us cash to take advantage of market corrections like the one we are currently experiencing.

Time will tell how much of an impact the coronavirus has on markets and the population at large. However, you as an individual and we as an advisor should only concern ourselves with what we can control. We encourage you to prepare for the virus in much the same way as we have prepared your portfolio, in a proactive manner to prevent fear-based decisions.

The information presented in this article is for educational purposes only and is not meant to provide individual advice to the reader. There is no guarantee the information provided above relates to your personal situation. All financial situations are unique and should be advised as such.

Adam Oerther

Author

Adam Oerther