How many investors said they wanted to wait for a market dip to buy, and now that it’s here, they are unsure? Covid-19 fears are becoming stifling around the world. Credit markets have slowed. Panic appears to be seeping into the markets. Feeling uneasy? More likely than not you are, and that’s ok. It’s human nature. The fear-based selling we are experiencing can be difficult while we move through it, but it is oftentimes short-lived (weeks, not months) and can actually be healthy for the longer-term market trend as it weeds out those investors that aren’t really investors.
Market momentum works in both directions… strength and weakness… so the volatility we have seen will likely continue until we get some clarity of Covid-19’s effect on corporate earnings. This clarity may not come until first quarter earnings reports begin mid-April, and even then we may not be assured. Companies have been withdrawing near-term earnings guidance, because they just don’t know. So we need to be able to stomach this uncertainty and ride it out for now. Hopefully we are talking about long-term money here, and not about the short-term money needed for living expenses.
The natural reaction during big market down swings is that ‘I should do something’. When the selloff is as broad based as it has been, there are few places to hide, so short-term activity could be fruitless, other than making ourselves feel better that we ‘took action’. A few things you may consider with your long-term investments, however, to prepare for an eventual recovery include harvesting losses, ensuring your investments meet your risk tolerance, re-balancing, looking into your dollar cost average schedule, and keeping short-term money liquid and long-term money invested.
Investing in the stock market is a marathon, not a sprint, and it seems that this current race may be experiencing muscle tightness on some rougher road conditions. Successful investors take a long-term view, look at times like these as opportunities, and may try to be a bit contrarian in their thinking when the media is running big red headlines in bold letters. We try to stay in this camp to help offset the emotion of seeing stock prices fall. Feel free to tell your financial professional if you feel like you cannot handle this type of recent volatility. Perhaps the risk you are taking is being masked by the hope of high returns, and the topic of asset allocation should be revisited.
As always, thank you for letting us help guide you along your financial path!