Coronavirus, markets, and the economy…

The global spread of the coronavirus has forced companies to halt business trips, crowded cruise ships to sit at port, and the Federal Reserve to issue an emergency cut to interest rates – the first since the 2008 financial crisis.

To end the month of February, the S&P 500 fell 10% in six trading days – the fastest move into correction territory in history.  In the first four days of trading in March, the Dow Jones Industrial Average whipsawed back-and-forth.

Note: percentages were rounded to the nearest tenth. Source: Wall Street Journal

Now, the pundits on TV and in newspapers are offering their predictions for where the market will go from here and whether we will sink into a recession. There are some, however, that have astutely acknowledged a simple truth…

We can be certain of only one thing, and that is that we cannot be certain of anything.

If that statement seems like a contradiction, it’s because it is.  Nobody knows what will happen to the market or to the economy for that matter.

Instead of allowing this idea to sow panic, it should serve as a source of clarity…potentially even comfort. That’s because amidst the chaos of irrationality, you gain solace in remembering your long-term plan. The investing strategy that you developed – the one that has worked for you for months or even years – will continue to do so. But it will only continue to work for you if you follow it. Here are a few reminders:

• Unrealized Losses – you have not lost any money until you sell a security…so don’t sell anything unless it is already part of your investment plan (unlikely for most).
• The stock market will rise – the market goes up and down, but over the course of years/decades, it will go up. Steep drops will happen along the way. Speaking of the market…
• You cannot time the market – few people on earth can effectively time the market consistently over any considerable period of time. When will it reach the bottom? No one knows. So be careful when waiting for that “perfect” buying opportunity.

As for the virus itself, the world will recover, we just don’t know how long it will actually take and what the human and economic toll will be.