The New Reality
Webb Financial Group
Fear, panic, uncertainty, social distancing, shelter in place and flattening the curve are all words that are part of our lives right now. The stock market took a serious downturn mid-March as a result of COVID-19 epidemic. While it has recovered some of its losses, it could take some time for prices to come back to the level we saw before the crisis.
Though there have been some minor corrections over the last 10 years of this bull market, this one is significant and will likely stretch into 2021. As we saw after the decline in 2008, markets do rebound and they can come back strong. While it is very unsettling because most of what is going on is out of our control, there are some things you can do to weather this storm.
Tune out the noise - There is no doubt that the virus is extremely dangerous and serious. Our instant news cycle amplifies every statistic and challenge facing us. It can be bad for our physical and mental health to spend too much time worrying about things that are out of our control. Take the steps that have been discussed by our leaders and do what you can to protect you and your family.
Revisit your asset allocation - The market tends to overreact, which we saw mid-March. The initial loss in the market reflected a price/earnings multiple that was worse than during the Great Depression but clearly we are not in that type of environment. If the decline was more than you’re comfortable with or jeopardizes your long term goals, you should meet with your advisor and make sure that your portfolio allocation meets your risk tolerance. We have a new program, Riskalyze, which helps you understand the risk/reward trade off and allows us to build a portfolio that meets your expectations.
Stay diversified - As we’ve seen with this market decline, it’s impossible to successfully time the market. Our portfolios are built with allocations to all parts of the overall market to give you the best possible outcome. The worst time to make a big change is after a large market swing. You will see us rebalance your accounts to reflect our most recent portfolio changes and to get your account back on track with our current recommendations. Staying invested in line with your long term goals gives you the best opportunity to regain your losses and rebuild your account.
The longer the shutdown takes, the longer it will take for the market to regain its losses and get back into positive territory. The economy before this crisis was fundamentally strong. It will return there once we get a handle on the virus and we can safely get back to work. We appreciate your business and are here to serve you. Stay safe and healthy and we look for better times later this year.