With that, we want to share three investment-related themes to keep in mind. First, don’t give in to the urge to take action. The news stories about the virus can be downright scary, but we need to remember that market prices react immediately to both good and bad information. To potentially make money or avoid potential losses, we would need to trade before it is news. And, of course, we don’t know the future, so any action would be a guess, and any positive result would be luck.
Second, we need to keep perspective. This isn’t the first new virus we’ve seen, and this won’t be the last. SARS, Zika, H1N1 and others have all come and gone. While the concerns at the time were the same (e.g., How quickly will it spread? Will there be a cure? Will it slow down the global economy? Will it impact my investments?), our society has figured out how to overcome past viruses, and markets have done the same.
In fact, markets have short memories regarding epidemics. Markets may initially react to the uncertainty and fear that comes with any new concern, but, for the most part, viruses get contained and investors return to corporate and economic fundamentals. We can see this pattern in the adjacent table. Market returns generally have been up in the six- and 12-month periods following the outbreak of a virus or disease. While this is a small sample set, we know that keeping focused on the long-term helps us keep a level head during all kinds of storms.
The third and final idea we want to share is to be on alert. Believe it or not, the Securities and Exchange Commission had to issue a public warning that fraudsters are attempting to play into our natural emotions of fear and greed during this period of uncertainty. There have been reports of social media posts and online ads promising a huge profit by investing in companies that have supposedly found a cure for the novel coronCoCoroavirus. We’re sure we sound like a broken record on this topic, but there are no sure things or get-rich-quick strategies when it comes to investing.
Our advice remains the same, to stick to your long-term plan and tune out the noise. We invest client money in a way that isn’t dependent on lucky guesses or get-rich-quick schemes. We use investment strategies and prepare financial plans that assume events like these will come and go. So, please, stay positive and focus on your family and your health. If you want to think about the virus, send positive thoughts toward those infected by the virus.
If you have any questions about your investments, need to inform us of family or work-related changes, or want to discuss your financial planning needs, please reach out. We are here to help you reach your financial life goals!
Data sources Ken French Data Library, Bloomberg, MSCI and St. Louis Federal Reserve. Long-term investing neither assures a profit nor guarantees against loss in a declining market. Past performance does not guarantee future results. Stock investing involves risks, including increased volatility (up and own movement in the value of your assets). All investing involves risk, principal loss is possible. R 20-XXX