From The desk of Margaret Sucré-Vail
February 28th 2020
It's Always Something...... Just when Investors think it's a free-for-all mania in the Stock Market the old ugly risk shows up in some form or the other!

The bottom line is there is no respect for risk in the equity markets and mania could not be indefinitely sustainable, there is never a permanent plateau.

Discipline like paying attention to your timeline of goals, re-balancing portfolios to desired risk, frequently and paying less attention to the run up of specific holdings or sectors becomes the saving grace in market surprises like the market is currently experiencing. Don't ignore the attention to tax efficiency on after investments because anxiety of a selloff creates tax liability on those investment at the end of the year. Probably the most important advise, is get back to basics and remember 91% of returns come from true diversification. Every investor is a genius when markets are on the up swing with little volatility, not so much in a correction.

Market Corrections: More Common Than You Think!

  • Equity markets around the globe fell into correction territory on intensifying concerns about the coronavirus.
  • On average, a correction in the U.S. stock market occurs every year or so and takes about three months to recover.
  • Despite the concern that corrections tend to cause, they are necessary for the health of the overall market.

On February 27, 2020, barely two months after returning an impressive 31.49% gain for 2019, the S&P 500 Index fell into correction territory—that is, when a stock-market index declines by 10% or more from its most-recent high. The drop was triggered by a sharp rise in fears about the China-born coronavirus and the impact of its rapid spread on the global economy.

It’s understandable that investors may be alarmed by such a dramatic market plunge, but it’s important to recognize three important facts about stock-market corrections:

Exhibit 1: Corrections are Common
1) They are quite common.
2) They aren’t typically tied to an economic crisis.
3) They are actually necessary for the health of the overall market.

Exhibit 1 provides some perspective: On average, U.S. stock-market corrections occur about once every year.
Before this month, the most recent correction in the S&P 500 Index took place in September 2018 as intensifying trade tensions and rising interest rates took a toll on stock prices. Prior to that, in February of the same year, a surprise jump in average hourly earnings and an increasingly hawkish Federal Reserve drove the U.S. equity market sharply below recent its high.

Exhibit 2: Notable Declines in the S&P 500 Index
Corrections don’t usually equal crisis
A further look back provides additional perspective: As seen in Exhibit 2, the average recovery period for declines of 10% or more is about 12 months. This may sound like a long time, but one year is just a temporary setback for a long-term investment strategy.
Corrections don’t last forever
When markets correct, we think it’s best to just wait. And, as history shows, there’s a solid chance of recovering correction-related losses relatively quickly. No one likes to see the value of their investments decrease, but we know that ups and downs are a normal part of the investment cycle.
Index Definitions:
S&P 500 Index: The S&P 500 Index is an unmanaged, market-capitalization-weighted index that consists of 500 of the largest publicly-traded U.S. companies and is considered representative of the broad U.S. stock market.
Important Information
This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice and is intended for educational purposes only.

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Margaret Sucré-Vail
Here is my article recently published in Forbes - Managing the Human Side of Wealth
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