Hello everyone, I am Howard Pressman a partner and one of the planners at Egan, Berger and Weiner. There are a lot of terrifying headlines out there surrounding the coronavirus outbreak. We are certainly experiencing a tragic health crisis that may get worse. It’s understandable to be frightened and concerned, no one knows how far the virus will spread and what its economic impact will be. This uncertainty is driving the dramatic selloff in stocks and it is certainly understandable to be frightened by the magnitude of the daily declines. During these challenging times, it is important to keep things in perspective. First off, while the value of the S&P 500 is declining rapidly, you’re not entirely invested in the S&P 500. Our portfolios have a variety of investments which respond to market events differently. Take a look at the recent performance of the three most common bond funds we own. You’ll see all three have experienced positive returns since the worst of the panic hit the markets. This is why we own bonds, to smooth out the scary times. Different portfolios have different exposure to these bonds, some have more and some less. But our most conservative portfolios have a pretty good helping of these bonds. The bottom line is that you’re most likely not down near as much as the S&P 500. I certainly understand the impulse to sell at times like these but trust me it’s absolutely the wrong thing to do. Yes, values have declined, but remember, you haven’t lost anything until you sell.
While the coronavirus will certainly have an impact on economic activity there’s just no way to know the extent of the harm. Given that the overall economy is in decent shape and globally, economic activity seemed to be picking up just prior to the outbreak we feel the medium-term impact will not be significant. Much of the economic activity will not be lost, rather it will be postponed until later in the year. U.S. household net worth has never been higher, household debt ratios are at lows not seen since disco ruled the airwaves and consumer sentiment came in just shy of its post-recession high at the beginning of February. The virus isn’t likely to change any of this.
I wish I could tell you the selloff will be over soon, but the reality is that it may get worse before it gets better. It’s important to remember that during past event driven selloffs, the markets have historically recovered quickly. We knew we would experience scary times such as this, selloffs are a normal part of investing and our portfolios were built with this in mind. At times like this, it’s important to stay focused on your long-term goals and your investing plan. You’re not alone, and we’ll get through this together.
If you would like to talk more about recent market events and its effect on your plan, please reach out to your planner at EBW. As always, we thank you for your trust and confidence.