Yesterday’s market was the largest point drop ($2,352) in the Dow Jones Industrial Average 124 year history and the largest percentage drop in one day, 9.99%, that we’ve had since Black Monday, October 19, 1987 – a much worse 22.3% that day. (And we recovered from that!)
I’m proud of my clients who see this massive market volatility in terms of their timing needs for the money they have invested. They’re not short term traders.
This particular market dropped rapidly, and may rebound just as quickly and there is no predicting exactly which day it will turn around. It’s time to view the market in months and years, not hours and minutes. Prudent investors don’t jump to conclusions over investment results on any given day. You understand that risk takes time to unwind in your favor. Balancing and controlling your fear and anxiety against your view of the long term prospects for positive investment returns is the prudent approach.
The S&P 500 is down -27% from its record highs, from 3,386 on February 19 to 2,481 at yesterday’s close. In order to fully recover, what would it take? And how long? In order for stocks to climb back to their highs within one year, the S&P 500 would need to rally +39% from current levels. To achieve the same feat over two years, we’re looking at a 19% annual total return. For 5 years, 8% per year, and for 10 years, 5% per year.
Consider this. Even after this -27% drop, S&P 500 investors from the bottom of the market in 2009 have earned nearly a +15% annualized return.
Your financial wealth didn’t change overnight, unless you cashed out now to actually realize this loss. As I write this, the Dow futures are up over 1,100 points at the market limit. Trading is halted until later this morning. The nature of market volatility has changed temporarily until the system finds a new equilibrium. That may take awhile, until more is known about the ultimate dissipation and control the world gains over COVID-19 virus.
Generally, all boats are floating on the same waters and there are few places to hide.
However, there are at least 4 opportunities that you, personally, and your stock portfolio managers can craft advantage.
- Call your mortgage broker, or call me for a referral to one, and gauge your rate against current terms. This may be a great time to refinance.
- The market is oversold, and there are opportunities for a portfolio manager to shift losing companies into true winners. One example, is online meeting companies. This is not a recommendation, but news that Carl Icahn purchased a large stake in Occidental Petroleum yesterday. Smart, prudent investors know what to do to create value for their clients. Unfortunately, investing in indexes, like the S&P 500 index removes this opportunity. If you’re in this situation, we should talk.
- During these times we need to be safe. You’ve heard plenty about how to change behaviors to increase your safety, which means more time at home and at least more time to think deeply and do things differently. That’s a great benefit. Small business owners may find time to review their online systems, marketing programs and customer contact systems. In the long run, looking at the world from a new lens helps you discover new opportunities in life, with your relationships and in your business. Work on those big decisions, like when to retire and what lifestyle you plan to enjoy during your second act.
- When the coast is clear to move about again more freely, there will be great deals on restaurants, hotels and travel – yes, including cruises in 2021/2022. Keep a watch for timing these bargains.
I believe Americans, the free world – and those yearning to be free – have overcome challenges much greater than this, and faith in each other and your personal faith in The Almighty will all work to create the increase in our lives that we desire. These challenges will be overcome, we will learn to become better at managing challenge and risk, and set again toward the goals we cherish so deeply.
Lastly, we are in this together. If you feel I can help in any way, please don’t hesitate to reach out. I’m healthy and willing to bring go to the pharmacy, shop for your groceries or run errands for my larger family, if you need help. My service and love for you goes deeper than the service and products I offer to support a living. Thank you for your confidence in me.
These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable. The S&P 500 is an unmanaged index of the shares of 500 widely held, predominantly large capitalization, U.S. exchange-listed common stocks. The index performance excludes dividends reinvested, fees and expenses. Investors cannot invest in any index directly.