Broker Check

Grappling with the Coronavirus


March 26 update: Coronavirus and the markets

For the third consecutive week, the markets began with a Monday sell-off followed by a Tuesday bounceback. All eyes were on both monetary and fiscal stimulus, and early in the week the markets viewed both with disdain. However, that changed as the week progressed.

From a monetary perspective, the Federal Reserve (Fed) took some extraordinary steps – colloquially called its “bazooka” moment – announcing the removal of caps on its purchases of Treasury bonds and mortgage-backed securities, and that it would purchase corporate bonds for the first time. While supportive in concept, the markets initially viewed this negatively, believing that the Fed may be running out of ammunition. However, this sentiment changed on Tuesday as investors began to see improving liquidity in the markets and, thus, everything from municipal and corporate bonds to equities performed very well. The Dow Jones Industrial Average was up more than 11%, its strongest single day percentage gain since 1932.

On the fiscal front, the week began with investors hoping Congress would reach a deal on a massive stimulus plan to support those impacted by the coronavirus. Negotiations stalled out on Monday, but that changed Wednesday morning when the Senate came to a bipartisan agreement for a $2 trillion stimulus package. While yet to be voted on by both houses of Congress and signed into law by the President, the proposed package consists of direct payments to individuals, small business loans, and unemployment insurance benefits.

The amount of monetary and fiscal stimulus being pumped into the economy is unprecedented. While the economic impacts of the coronavirus will likely be damaging, government entities are doing everything in their power to bridge the economic gap until the crisis passes. Nevertheless, wide day-to-day market swings can be disconcerting for an investor. Please do not hesitate to give me a call if you have any concerns about your current investment plan.

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In your investing lifetime, you may only see a situation like the recent novel coronavirus (COVID-19) a few times. This is a circumstance where complete candor is necessary. The truth is that we can’t yet gauge the full economic impact, and by the time we can, the volatility may have passed.

It’s important to remember that, in terms of market declines, the recent drop isn’t unprecedented. In fact, in the last six day-to-day declines of 3% or greater, the market rebounded higher a month later. Past performance is no indication of future returns, and it’s uncertain whether history is a good teacher in this instance.1

Markets Have the Virus

Right now, markets are reacting to the news because the outcome is unknown. In a way, COVID-19 has “infected” markets all around the world. In times of market uncertainty, some traders believe the best approach is to sell. Fear is driving decisions. Nobody would blame you if this uncertainty gave you a bit of
anxiety, as well.

You Don’t Buy Snow Tires in a Blizzard

By working together to develop an investment strategy that fits your risk tolerance, time horizon, and goals, we have been preparing to weather turbulence. When a blizzard hits, the people who already own snow tires are usually happier than those venturing out into the cold, hoping they’re still in stock. In the same way, it’s generally best to make decisions during periods of low market volatility. We’re in the middle of the storm right now.

Here to Support You

This may be the time you need a trusted financial professional most. During most volatility, we advise you to “Be a long-term thinker, not a short-term worrier,” and that generally proves to be the best course of action. In times like this, however, it’s easy to question conventional wisdom.

Remember, we are here to help you and your family during this time. Whatever decisions you make, please allow us to support you through them. Feel free to reach out to our team with any questions or concerns.


1. wstreet.com, February 27, 2020


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