Market Update: March 9, 2020

March 9th, 2020

As COVID-19/Coronavirus fears grip the world, the stock market has taken a beating over the past two weeks, with today’s drop leading the charge. So we thought it would be helpful to do a recap of what’s been going on and try to put it in perspective.

Here are the facts:

• All three major stock indices were down over 7% today.

Dow: – 7.8%
S&P 500: – 7.6%
Nasdaq: – 7.3%

And over the last two weeks they’re all down close to 20%.

• 30-Year Treasury bonds (bonds issued by the US government) are yielding historic lows, below 1%. (When things are bad, investors flee to bonds for “safety” and prices are inverse to yields. So high prices means the return, or yield, you’ll earn will be lower.)

• The price of oil is down 25% just today.

Pretty grim to say the least.

So what should you do?

Well, if you’re already invested, probably nothing.

We know it’s painful. But try to remind yourself your investments are for the long term. What’s worse than watching your portfolio plummet in a week? Watching it plummet, sell out, and then watch it rebound. Again, easier said than done, we know.

But keep in mind the stock market has still shown strong gains over the last five years, even with this correction. The S&P 500 and the Dow are up about 40% since 2015 while the Nasdaq is up even more. And that doesn’t even include dividends.

What if the market goes down even more? That’s certainly a very real possibility given how volatile the markets have been recently. But trying to time a market bottom is virtually impossible, even for professional investors. Generally the worst time to sell your investments is after a large drop like we’ve seen.

What if you’ve been sitting on the sidelines waiting to invest? Is now the time to jump in?

It depends.

It’s almost always a good idea to invest at least some of your money for long-term goals like retirement. (We can help you get started with our Investing Cheat Sheet if you’re interested). And the cheaper stocks are, the more bang you’ll get for your buck when you buy. So a down market can actually be a good thing in that sense.

But on the other hand, if you’re expecting a rapid rebound in stock prices and hoping to make a quick buck by “buying the dip”, that’s probably not a great idea. It might play out that way, but there’s just no way of knowing. Nobody knows what the stock market will do, especially over short periods of time like days, weeks, or even months.

So it’s generally best to stick to your long-term plan and weather the storm.

This is part of investing, for better or worse

The market has had a tremendous bull run (aka good time) over the last 10 plus years. Which means it’s pretty easy to start thinking only good things come from investing.

But in reality, it’s a bumpy ride. Corrections like this happen, and happen somewhat regularly. In 2008 global markets dropped by much more than they have already here and after the 2000 dotcom bubble bust, many tech companies never recovered.

Stock investing carries risk. But it also carries reward, in the form of long-term returns that tend to beat inflation. Of course no one likes losing money, but it’s important to have a healthy appreciation for how the market works, and to have realistic long-term expectations of both the good and the bad that comes with investing.

Please remember, we are NOT a stock broker

Keep in mind none of this should be taken as advice to buy or sell any investment whatsoever. You should talk to your financial advisor about that.

However, if you would like a free (and judgement free) assessment of your financial health, with simple, actionable feedback and in depth explanations of topics like your credit, buying a home, or investing, then we have you covered. It’s also 100% automated, so you don’t need to talk to a person. It all starts with a quick quiz about your general financial habits (we won’t even ask how much money you have/earn). Get started now!

You can also follow us on social media for future market updates or if you want a reminder to take the quiz later @findwesdotcom