Financial Coach – March 10, 2020
Yesterday — March 9 — was the eleventh anniversary of the crescendo of global panic that marked the bottom of the bear market of 2007-09.
It is a thing of the most wonderful irony that the world has elected to celebrate this iconic anniversary with – you guessed it – another epic global panic attack.
At yesterday morning’s opening level of 2,764, the S&P 500 was down over 18% from its all-time high, recorded on February 19. Declines of that magnitude are fairly common occurrences – indeed the average annual drawdown from a peak to a trough since 1980 is close to 14%*. But such a decline in barely a month is noteworthy, not for its depth but for its suddenness.
As we all know by now, the precipitants of this decline have been (a) the outbreak of a new strain of virus, the extent of which can’t be predicted, (b) the economic impact of that outbreak, which is equally unknown, and (c) most recently, the onset of a price war in oil. (That last one is surely a problem for everyone involved in the production of oil, but it’s a boon to those of us who consume it.)
The common thread here is unknowability: we simply don’t know where, when or how these phenomena will play out. And in our experience, the thing in this world that markets hate and fear the most is uncertainty. We have no control over the uncertainty; we can and should have perfect control over how we respond to it.
Or, ideally, how we don’t respond. Because the last thing in the world that long-term, goal-focused investors like us do when the whole world is selling is – you guessed it again – sell.
Until then, your team at Financial Coach is monitoring your investment accounts very closely, rebalancing when necessary, and tax loss harvesting if possible.
Our team at Financial Coach publishes a weekly podcast, Untucked, where we discuss investor behavior during times of volatility. We recommend listening to this (below) instead of your daily news programming.
You can hear more episodes at: https://untucked.podbean.com/
Thank you for continuing to hang in. Should you have questions, concerns, or just need a pep talk, please do not hesitate to give us a call. We also recognize the growing concern around the Coronavirus and are willing and able to host meetings via FaceTime or Skype, should you choose.
– Your team at Financial Coach
*JP Morgan Asset Management’s Guide to the Markets, page 13