Reflections on Market Swings

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A Note from our Advisory Team

We are in the midst of global events that are of deep concern to all of us. We realize during this period of alarming news headlines and unsettling market drops, you may have questions about what actions to take given the uncertainty ahead.

Every crisis is different in its details, and 2019 coronavirus is no exception. The previous health outbreaks this century fit into two categories. In the first category (SARS, Bird Flu, MERS, Ebola), the number infected were relatively small ranging from 600 to 28,000, but the death rate was high ranging from 10% to 40%. In the second category (Zika, Swine Flu), the number infected were high at 1.5 million to 1 billion, while the death rate was relatively low at 0.05% to 0.2%. We’ve dealt with these two categories successfully multiple times.

So far with the 2019 coronavirus, the number of infected and death rate lie between the two categories at 113,000 and 3 to 4%, respectively. And this has fueled the fire of uncertainty, which is never a good thing for the stock market in the short run. Further, nobody knows the depth of the crisis, or whether it will be resolved by a vaccine or by containment and control. Yet, we know that it will be resolved. And as health professionals and governments mobilize with increasing organization, we will see, as we have seen in all past crises, that this time is not different.

As of March 9th, the market was down 19% from it’s all-time high reached on February 19th. Declines like this are fairly common and occurred most recently in 2018 and 2011.

At Abacus, we are closely monitoring reports from sources such as the Centers for Disease Control (CDC), the World Health Organization (WHO), and others. We know the reports are daunting and the COVID-19 virus has become personal for some.

We are also monitoring the sell-off in the oil market and do not believe its spillover into stock market declines has any justification other than the short-term uncertainty it causes. Ultimately, cheaper energy will be a boon for the vast majority of companies and investors.

It is especially unsettling to deal with multiple market crises at the same time. Many of you were with us in 2011 when we dealt with a trifecta of events: European debt crisis, US government shutdown, and the first downgrade of US bonds in history. The market worked its way through that over five months and bottomed out when the S&P 500 reached 1,099. As we write, the index stands at 2,746.

We understand the fear and anxiety that’s present on a minute-by-minute basis in our 24-hour news cycle world, and we’d like to remind you of a simple question to reflect upon when panic strikes:

Have your long-term goals changed?

If your answer is “no,” chances are there is no reason for your investment plans or allocations to change either.

As long-term, disciplined investors, we will experience bad market days and bad market headlines over the span of our investment time horizon. Setbacks like we’re seeing are temporary, and permanent loss only occurs when one chooses to sell. Remember, there are far fewer bad market decades and the long arc of market history has always trended toward growth. You and your advisor have made thoughtful long-term plans for your future. It’s important not to let short-term anxiety derail you.

In fact, on days like yesterday when many in the market react to their emotions, our Abacus trading team steps in to buy shares at relatively low prices through our disciplined rebalancing process. Our team is staying the course on plans laid out with our clients.

If you are feeling anxious about your investments or financial plans in general, consider:

  • Calling your Abacus Advisor directly and reviewing your long-term strategy or simply “talking it out.”
  • Shutting out the “noise” by turning off the television or closing your web browser.
  • Take a walk, pick up your favorite book, or read our latest blog post on Five Mindfulness Practices That Change How We Relate to Money.
  • Stocks are a better buy today than they were at the market high.
  • If you can’t turn off the news cycle, be selective of which sources you choose to watch and ensure they’re reputable.

We welcome your inquiries around this issue, or any other concerns you may have. We are grateful for the trust you place in our team and for allowing us to help you expand what’s possible with your money. We are here with you each step of the way.


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