Cornavirus Market Sell Off

“Stay calm, stay calm, stay calm…..okay now everyone panic,”- Clearly not eloquently speaking, this is our best description of the stock market movements this week. In our opinion, energy spent panicking over this market sell off is energy wasted- we are big proponents in the vicious economic cycle, and no good comes from making drastic decisions in an effort to get ahead of something we have no ability to control. At the time of this writing, the Dow held its biggest one-day point decline in history on Wednesday and dropped almost 1,500 points, and the S&P 500 closed under 3,000 at its lowest since early last fall- more than 10% lower than the record high we saw just last week. As the markets move into what stands to be the fastest correction in history in six trading days (another unfortunate record), what we have been writing and preparing for has finally come to fruition- we strongly believe we’re due some volatility after such a strong showing in returns in 2019.

The chaos that has ensued from the Coronavirus has taken a heavy toll socially and economically. As the number of people infected goes up, stock prices have gone drastically down in an event that is taking the form of a devastating market sell-off. In the interest of not downplaying the effect the virus has had on several countries, a majority of the cases have been located in China- our global economic hub. Shake China’s economy, and you shake the global economy. Several businesses similar to Apple and Microsoft, down 18.14% and 14.72% for the week respectively, whose revenue relies heavily on China, have taken a large dive due to a fear of supply and demand issues. Given that these companies hold major percentages in the indexes, it’s impossible that we wouldn’t see some overall decline. So after months of being spoiled with dream returns, it’s time to brace ourselves for the monthly statements that will result from these drops. There is no algorithm that can determine the spread of an unforeseen pandemic and its potential turmoil in our entirely dependent-on-other-countries stock market- so the panic sets in, investors give in to the mass capitulation, and now we find ourselves possibly on the way to a bear market. So where can we expect to go from here?

Historically speaking, corrections at this level can take about four or more months to recover, however if we continue the track that we’re on, we could be looking at a longer time frame. While the Coronavirus is new and we’re seeing uncharted territory on interest rates and treasury yields (10-year treasury dropping to 1.18% this week), this market is not something we haven’t encountered before. The stock market is always quick to drop and slow to rise, solidifying in us what we have always believed- long term patience over short term panic will always prevail. We had a great year of returns in 2019 to financially prepare us for this volatility; so trust the process, brace yourselves for potential further decline, and hang tight for the steady rise that will undoubtedly come as this too shall pass.

Please note that indices mentioned are unmanaged and cannot be invested into directly. Past performance is no guarantee of future results.

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