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March 19, 2020
While market volatility currently overwhelms the headlines, we think it is important to take a step back and provide perspective on the markets during the current coronavirus (COVID-19) outbreak as it relates to previous epidemics.
As illustrated in the chart below, a viral outbreak like COVID-19 is not unprecedented. Looking at a dozen epidemics since 1980, we see that despite short-term setbacks, market growth has continued, as indicated by the S&P 500® Index.
Market Growth After Epidemics
Source: S&P 500 Index
What this means for investors
It is important for investors to see these events in perspective with others in history. While immediate market reaction seems drastic, historically, recovery isn’t far off. On average, the S&P 500 Index posted a gain of 8.46% six months following these outbreaks.
Source: Yahoo Finance
Please understand that we are, by no means, attempting to minimize the effects and seriousness of the current pandemic situation. But at the same time, we are also mindful of the wisdom of Baron Rothschild who once said, “The time to buy is when there’s blood in the streets.”
As always, please reach out to our team if you have any questions or concerns.
March 16, 2020
In 1939 the British government created a motivational poster in preparation for World War II. The "Keep Calm and Carry On" poster was intended to raise the morale of the public, which was threatened with widely predicted mass air strikes. And while a communique like this today might sound trite or simplistic, its general message still rings true. Over the past couple of weeks during our historic market volatility and global health scare, the one word that comes to mind is "fear." Yes, we should be mindful and respectful of warnings and best practices conveyed by government and health professionals. A global pandemic is nothing to ignore. And regardless of where you are in your investment and retirement planning journey, a 20%+ drop in the market could surely cause concern. But just as cities and states prepare for hurricanes and other emergencies, we have prepared you and your investments for the dips, drops and inevitable recessions that blow through our windows from time to time. On Sunday, the Federal Reserve cut its benchmark rate by a full percentage point, to near zero, and announced it will boost its bond holdings by $700 billion in an emergency move aimed at combating the potential economic fallout caused by what is likely to be a slowdown caused by the Coronavirus pandemic. The Central Bank stated it will use its “full range of tools” to battle the economic impact of the novel Coronavirus. They will keep interest rates near zero “until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals,” the Federal Open Market Committee (FOMC) said in a statement. “This action will help support economic activity, strong labor market conditions, and inflation returning to the committee’s symmetric 2% objective." Other moves announced include allowing banks to borrow from the discount window for as long as 90 days, reducing reserve requirement ratios to 0%, and a coordinated action from five global central banks to enhance dollar liquidity around the world through existing dollar swap arrangements. As for the stock market, keep in mind that it usually serves as a "leading" economic indicator. Therefore, the current market has probably taken into account much of what we are about to experience in terms of contracted cases and deaths from this pandemic, as well as an economic slowdown. This also means the stock market usually recovers before the economy recovers, which means it will probably recover before the effects of this pandemic are a thing of the past. It is in these times when we are prepared to discuss your options with you, and give you the peace of mind you deserve. So what does it mean to "stay calm and carry on?" Stick to the plan. At this point that could mean "stay the course," or more than likely it could be time to take advantage of lower equity prices and buy into this dip. Whether you're already at peace with your plan and current circumstances, or you're feeling stressed and concerned -- know that we're always here to answer your questions and talk things through.
Over the past few days, global markets, both equity and fixed-income, have experienced considerable volatility. Stocks around the globe declined as news of the emerging, rapidly evolving spread of the novel coronavirus gained momentum moving from China to South Korea, Iran and Italy. The Federal Reserve responded with concerns that the virus would slow economic growth by affecting the global supply chain. At the close of trading on Monday, February 24, the Dow Jones Industrial Average fell just over 1,000 points. In reaction, investors moved money into bonds under the premise this action would be a safer place to house their assets. This movement of money pushed the 10-year Treasury toward record lows. Unfortunately, epidemics have been with us throughout history and are not uncommon. There have been several that captured media and market attention, including SARS, Swine flu and the Ebola outbreak just five years ago. It is important to remember that today is far different than the distant past. Much of the world now has a robust health infrastructure to monitor and react to disease like the Centers for Disease Control and the World Health Organization. Swift and strong stock market reactions to unsettling events are also not uncommon. While a market decline grabs headlines, perspective is helpful here as well. You deserve better than knee-jerk reactions. While a 3% decline in one day is significant, it pales in comparison to the powerful returns last year yielded. Volatility is a part of investing. The key is to be aware of risks and build portfolios in anticipation of volatility, not in reaction to it. That is a core principle of our mathematical approach in being stewards of wealth. It is possible that the uncertainty around the virus outbreak will be with us for some time. However, it is important to maintain long-term perspective when macroeconomic concerns impact market performance. We care deeply for the impacts the novel coronavirus is currently causing to people around the globe but are dedicated to rational examination and discipline as our most-powerful tools for long-term perspective. That is our commitment to you. If you would like to discuss your portfolio or just talk, we are here.
Maller Wealth Advisors is proud to be one of the largest financial planning firms in Greater Baltimore, and looks forward to continued success working with our valued clients and partners in 2020 and beyond! Thank you to The Baltimore Business Journal for the recognition!
2019 BBJ Financial Planning Companies list
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MWA has expanded our services to include the implementation, managing, and services of corporate retirement plans for employees of small, medium and large businesses. Qualified plans will include 401Ks, 403Bs, simple IRAs, profit-sharing plans, defined-benefit plans and cash-balance plans. “Retirement plans have become more and more important to employees in the workforce today, and we […]
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