2.28.20 Market Correction

I hope this finds you and your family doing well!  Part of our communication protocol is to reach out to you when the equity markets enter correction status-down more than 10% at closing from a previously established record high.  We did that yesterday on both the Dow Jones Industrial Average and the S&P 500.1  When we experience these kinds of swings, I think it is important to understand that corrections are a common occurrence though usually not as swift as what we have experienced this week.  From 1949-2018, a 5% or more decline from a previously established high has occurred about 3 times a year.  A 10% or more correction happens about once a year.2

As we talked about on our February video, the markets do not like the unknown.  Our latest episode of this uncertainty has been centered around the coronavirus. Every virus is different, but looking back at other major global outbreaks over the last three decades (SARS, bird flu, swine flu, Zika, etc.), we can see that the impact to the U.S. and global economies and stock market has tended to be short-lived. It’s possible the current virus has the potential to follow a similar path, although there is still significant uncertainty. The coronavirus has spread more quickly than SARS, the most comparable outbreak, but the policy response also has been more aggressive, and the survival rate has been higher.

So what happens from here?  No matter how many talking heads opine in the media, the ultimate depth of the current correction cannot be predicted.  If you think back to the move we’ve experienced since March of 2009, neither can the upside for that matter.  It is important to control what we can control and stay focused on the long-term visions and goals you have shared for yourself and your family rather than us get caught up in current events.  For those Clients that are in the accumulation phase, pullbacks are heaven sent and an opportunity to purchase more shares.  For those Clients drawing on your investments in retirement, I invite you to take comfort once again by having your Emergency Fund that we have spoken about so much over the years should you need to access it in the future. 

We have been in the process over the last couple of weeks of updating the Navigating the Ups and Downs article on the Client Center at EastwoodWealth.com with the newly released graphics encompassing 2019.  I hope to have this fully complete in the next few days, but please visit and reread this section of the website at your convenience.  I also invite you to read Our Blog or connect with us on social media through YouTube, Twitter, LinkedIn, and Facebook to stay up-to-date with information as we stay on top of this event.  If you would like to talk about anything further, please feel free to reach out to me anytime.  Thank you for allowing us to serve you and your family, and I hope you have a great weekend!  Take care, Tim

The opinions expressed in this material do not necessarily reflect the views of LPL Financial

1 Source: Yahoo Finance

2 Source: RIMES, Standard & Poors, Capital Group