Stock markets around the world continue to display concerns about the coronavirus with the Dow (as of this writing) currently down 17% off its recent high at the beginning of February. The last drop of this magnitude came at the end of 2018, with the Dow dropping almost 19% in roughly three months over trade concerns with China. The coronavirus drop has taken place in roughly a third of the time, so it is clear there is concern about the financial and economic implications of governments battling the disease with quarantines and other measures.
Though it is hard to sugarcoat what is happening right now, we want to remind you of what we are doing to keep your money safe. First, now more than ever we are keeping a long-term focus. We have no intention of reducing our exposure to stocks. The market is doing that for us, making it likely we will rebalance in favor of stocks as the selloff continues. We do not and would not recommend selling stocks right now. It is far too difficult to time the market, especially given the speed of its recent ups and downs. Just as every time before, stocks will recover, even if that means eventually.
Second, we do not change long-term allocations based on short-term market performance or the perceived future direction of stocks. We rebalance structurally according to the investment policy statement (IPS) which was signed and enacted at the initiation of our relationship, or possibly more recently due to life changes, such as retirement. This allows us to better keep our emotions out of investment decisions, buying stocks as their portfolio weighting falls using cash from maturing bonds. This is a built-in method of attempting to buy low and sell high.
Our third measure has been to meet and discuss, as a firm, how we will continue to perform our daily functions, namely trading on your behalf and moving money as requested, if we cannot be in the office. We want you to feel assured that should a time come when it is necessary to work from home, we are set up to access and use phones, email, money movement processes, and trading within the secure blanket of our comprehensive IT systems. In the meantime, our clients should continue to stay informed from trustworthy sources. It is all too common for ne’er-do-wells to see events like the coronavirus as opportunities. If you receive any suspicious calls or emails seeking personal information, err on the side of caution by ignoring it, or by asking a trusted source, such as us, for help.
If you have concerns regarding your investments or financial well-being, you are not alone. The best thing to do is to take a deep breath, be calm, and remember that investing is a long-term enterprise with many ups and downs, some bigger than others.
Wash your hands often, be well, and be in touch.