The recent coronavirus pandemic, and resulting panic, has affected every aspect of our lives – our portfolios, social interactions, expressions on social media, schools, recreation, and stress levels. We are still learning much about the virus and its potential impacts. It’s normal to have fear or doubts during uncertain times. From an investment perspective, we have now entered a bear market in stocks, which many experts define as a 20% decrease in value.
Unsurprisingly, stock market volatility has continued this week. Here are the daily price returns of the S&P 500:
As we have stated in prior communications, many client accounts are not down to this extent because of exposure to safer investments such as bonds and cash.
When prices move this much, it presents opportunity for us to find new investments at attractive prices and to review client accounts to check for proper diversification and balance. Our team has been working on both of these fronts.
The following chart helps provide context to the current market moves through a longer-term lens:
The chart shows three portfolios – all stocks, all bonds, and balanced 50/50. Over short-term timeframes, such as 1 year, there is a wide range of potential outcomes. But, over longer-term timeframes, the range of potential outcomes gets smaller and much more positive. Even over 5 years, which is still a relatively-short timeframe, stocks and bonds are positive most of the time.
We aim to communicate our thoughts effectively with these updates. If you have specific questions, please call or email and we’ll be sure to respond to you as soon as possible. In the meantime, we hope this helps reassure you and give perspective with regard to the current markets.