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What do we do now?

What do we do now?

| March 19, 2020

As of the close of the market yesterday, March 18, 2020, the S&P 500 was down -29.51% from its high on February 19, 2020.  One month is all it has taken to turn stock charts a deep crimson.  This bear market has come swift and fierce - but then again most all do.  They don't call it a "Bear" because it's timid.  I love the perspective Capital Group® offers on Bear Markets.  Summary: They tend to be scary and painful but short-lived and pale in comparison to Bull Markets.

However, here we are experiencing the pain as investors and asking the only natural question, "What do we do now?"  Again, I offer another great piece by Capital Group®How to handle market declines.  This is well worth 5-10 minutes of your time.  You're quarantined anyway, might as well.  But, I'll summarize here - There are seven investment principles to know and follow during times of heightened emotions and market turmoil:

  1. Market Declines are part of investing
  2. Time in the market matters, not market timing
  3. Emotional investing can be hazardous
  4. Make a plan and stick to it
  5. Diversification matters
  6. Fixed income can help bring balance to a portfolio
  7. The market tends to reward long-term investors

I will add one more principle that is not included in the article - 8. Tune out the noise - 24 hour news sources and social media posts designed to prey on human emotion tend only to gaslight the investor.  Use them for information and entertainment purposes, but apply the adage of "everything in moderation".

Great - what about the original question?  What do we do now?  As unsatisfying as it is to hear, maybe the best thing to do is nothing.   

I have a two-year old son who, unfortunately, loves to watch television - specifically the "Cars" movie series.  It's my fault, I introduced him to them.  First thing I hear from him every morning is not, "Good morning, Daddy!", but instead, "Watch cars?"  My typical response is, "No, you have to wait."  Sometimes the waiting is only for an hour or so, like on Saturday mornings until after we have breakfast and his little brother goes down for a morning nap.  Most days the waiting takes all day until Daddy and Mommy come home from work.  And, sometimes he waits for several days - we try to limit screens as much as possible (doesn't always work).  The waiting is excruciating as he goes through all 5 stages of grief - denial, anger, bargaining, depression and finally acceptance.  But, the reward when the waiting is over is huge. For him and for Daddy and Mommy. 

Investors sometimes have to wait.  Waiting, while hard to endure emotionally, tends to pay off in the long-run.  Focusing on the things you can control like re-balancing, tax-loss harvesting, and systematic investing can help to tide you over, as can looking at the income generation happening in your portfolio through continued dividend and interest payments.  But the real work comes in having the patience to wait for a rebound that logically and in all probability will come. 

We are here to help during the wait just as much, if not more so, during the reward.  Please reach out to us if you need guidance in your specific situation.  In the meantime, know that our advisors, analysts and portfolio management colleagues are hard at work trying to find opportunity to leverage in your portfolios and financial plans.    

** Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss. Past performance is not a guarantee of future results. This material may contain forward looking statements and projections. There are no guarantees that these results will be achieved. It is our goal to help investors by identifying changing market conditions, however, investors should be aware that no investment advisor can accurately predict all of the changes that may occur in the economy or the stock market. The Standard & Poor’s 500 (S&P 500) is a stock market index containing the stocks of 500 American corporations with large market capitalization that are considered to be widely held. The S&P 500 is unmanaged and cannot be invested in directly.