Broker Check

The Coronavirus & Your Investments

The Coronavirus & Your Investments

| February 11, 2020

Is there any insight that past viral pandemics and financial market performance can tell us regarding the Coronavirus outbreak and our current investment decisions? In our opinion there is little doubt that social media and the 24 hour news cycle will contribute to “knee-jerk” market reactions as the reporting of infected people increase. However, long-term investors should maintain broader perspective.

By now I think the many clients who have been with us over the years (and through multiple pandemics, elections and recessions) can anticipate our “mantra” to avoid daily media noise and focus on your long-term investment goals. However, there are many variables that affect both short and long-term market performance, and the multiple issues surrounding the current news of the day can evolve in unpredictable ways. It is always prudent to assume that things will get measurably worse in the short-term before they get better.

Being emotionally and financially prepared for the potential short-term volatility ahead (at all times and for any reasons) is a prudent approach we constantly emphasize. Times like this are important reminders regarding the need to continually maintain an appropriate asset allocation/investment strategy. Knowing we have a plan in place to “pre-prepare” for poor markets  by maintaining sufficient liquidity outside of more volatile stock and stock mutual fund investments coupled with some healthy perspective are the keys to maintaining the long-term focus required to achieve your financial objectives.

For some perspective, let’s look at past viral epidemics and market performance. Immediately below is a chart reflecting the short-term effects on global financial markets within the context of a long-term market view (source: MarketWatch):

Here’s a bit of a longer-term view and U.S. markets:

We don’t know the extent of the current Coronavirus epidemic and how far-reaching the effects will be. Data confirm that reduced economic activity caused by necessary quarantines are already evident (source: Wall Street Journal). However, there is little evidence and logic that would justify a recommended change in our current investment approach at this time. It also appears likely that there will be a different combination of factors than those that currently exist that would cause our next bear market.

Regardless of what the factors may be that cause the next bear market, we feel you are “strategically prepared” for that eventuality. The periodic optimization and rebalancing of your portfolio holdings ensures your asset allocation maintains appropriate diversification and risk/return goals, while our comprehensive review meetings help us confirm that your investment strategy and available liquidity remain properly aligned with your changing circumstances and financial objectives. Of course these strategies do not guarantee or protect your portfolio from potential loss; however, we will continue to maintain fundamental planning principles that should help reduce volatility and provide you the confidence to look past short-term hazards that can “emotionally derail” your long-term retirement plan.

We look forward to our next comprehensive review meeting.

Your HDR Team

Using asset allocation or diversification as part of your investment strategy neither assures nor guarantees better performance and cannot protect against loss of principal due to changing market conditions.

This material represents an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed by Kestra Financial LLC as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. The indices mentioned are unmanaged and cannot be directly invested into. Past performance does not guarantee future results. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the US stock market. The Dow Industrial Average is an unmanaged index of 30 stocks.