Who would have thought that we would plunge from nearly 30,000 on the Dow into bear market territory in one month! Professional and college sporting events cancelled. College classes all on-line. Travel restrictions. Political unrest...well that part we expected.
The bull market has vanished. It had a good run for 11 years, albeit that last 28 days of it were a cliff dive. Yet even that sudden descent was interrupted by the two best point gains EVER! But now we just experienced the worst point day loss ever, March 12, 2020.
Surely you may have had this thought: “I should get out- I should run to cash- I know I can’t stay there forever since money market returns do not typically keep pace with inflation, but I would rather underperform inflation now than lose everything!”
Fear. It’s real and it’s especially real if you think you might lose something that you have worked very hard for. I’m not going to attempt to regulate your emotions, but I am going attempt to motivate your actions, or in this case, motivate you to IN-ACTION.
In the past 37 years, I have lived through and served clients during 3 previous Bear markets:
- Housing Bubble Bust: Late ’07 to early ’09: -51% top to bottom decline over 1.3 years
- Dot-Com Bubble Burst: ‘00-’02: -45% top to bottom decline over 2.1 years
- Black Monday/Currency Valuation Fears: 1987: -30% top to bottom decline over 3 months
The majority of people I know who ran to the safety of money market-type accounts in previous bear markets, did so with the objective to return to equities “after things calm down.” Here are two BIG problems with that tactic:
- The beginning of a subsequent bull market can be just as volatile as the bear market that preceded it, so it’s easy to be PARALYZED about if and when to get back in. It's easy to find ourselves one year into a new bull market, only to look back and realize what you may have missed.
- Temporary loss becomes permanent loss when you act. When you sell. When you don’t sell, you watch the losses mount up on paper and that's not the greatest feeling, BUT you still own your shares!
Now here are two planning tactics that can and should be considered:
- If you can, eliminate or reduce withdrawals from your portfolio. If you were planning a distribution or even if you are on a monthly automated one, if you have excess cash that can be deployed, let us know and we’ll temporally stop or reduce your withdrawals.
- You have heard about “buying low.” Most of the time that sounds academic, but right now it’s real! If you have excess cash, we are currently looking at pretty significant “sale” prices, relative to where we have been. Our advice has always been to invest for at least five years, so if you are in that position, consider adding to your account or at least, dollar-cost-average in, which is to contribute to the cash account within your portfolio and then over a period of months, incrementally add to your holdings. .
Finally, PLEASE do join our webinar with Symmetry Partners scheduled for Tuesday, March 17th at 11:00 AM eastern. Here is a link to register:https://register.gotowebinar.com/register/845974547307029004
At Henry Wealth Management, we are standing with you. We understand and are sympathetic to your emotions and even more so, if you or someone you know has contracted the Coronavirus. Yet we are resolute in our opinion that the best thing you can do now is NOTHING, except to tighten your seat belt. Thank you for your consideration, your business and your trust.
The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. Comments concerning the past performance are not intended to be forward looking and should not be viewed as an indication of future results