Our typical approach to market related communications is to provide perspective and reassurance when you need it most - during the middle of the storm, when markets have declined substantially, and investors are running for the exits (selling at the worst time). In consideration of the recent strong performance of the US Stock Market, the potential for high election year volatility, and the outbreak of the coronavirus, we decided to offer some proactive food for thought.
There is no shortage of uncertainties related to a host of topics including geopolitics, domestic politics (impeachment trial and election), viral outbreaks and the list goes on. Reports of “Breaking News” regarding uncertainties pop-up on our mobile phones, tablets, TVs and social media sites creating an echo chamber that repeats stories at nauseum resulting in fear, concern and confusion.
As we’ve discussed during our scheduled client reviews, we anticipate a period of higher volatility during election years, and it’s likely we will experience short term declines, perhaps to a significant degree.
Unlike political elections, there are occasionally events we can’t see coming. The recent outbreak of the coronavirus is an example that is top of mind for many. Although it is impossible to accurately predict the course of a virus or its impact on markets, history may provide insights worthy of consideration. The stock market’s reaction to past outbreaks and quickly spreading diseases was often short-lived, and positive within six months of the first occurrence (see chart below):