The coronavirus seems to be all that people are talking about today. The World Health Organization has officially declared this a "pandemic", which has created plenty of uncertainty. The markets absolutely HATE uncertainty. When an election year is thrown in, we have the makings of some dramatic uncertainty coming our way over the next several months.
From a financial perspective, the obvious fear has been that the coronavirus could cause a global economic slowdown. Certain economic sectors and industries are already experiencing significant short-term effects and no one can say for sure right now what the longer-term impact of the virus might be.
However, we would like to reassure our clients that they are fully protected against any severe or long-term downturn. As part of our planning process, we allow for a reasonable amount of market volatility. How much depends on the client and it's different for every person. We build safeguards into every plan that protects all our clients from serious, long-term losses. That approach is simply the core of our business.
If you look back historically at crises like the MERS, SARS or Ebola virus scares, you will see that the situation was more of a short-term phenomenon and that global economic activity returned to normal once people developed a better grasp of the real impact of the virus. I think that's what will happen here as well.
But beyond the virus, I believe the stock market was overdue for a correction. It has been going almost straight up for 11 straight years. Usually, you get a 15% to 20% correction every five or six years ... so even though the virus scare may have been the triggering catalyst, I think what we are seeing is a normal market cycle and not the start of a major long-term downward trend.
Over the past several months, I have been cautioning my stock market clients about a correction and we had already started moving some of their profits to safer investments. That turned out to be very fortunate timing. Of course, I absolutely did NOT anticipate things would drop so quickly. But in most cases, we were well prepared for a downturn and I'm very glad we were cautious early.
However, most of our clients are much more conservative. The plans we've built for them are much safer and far less affected by stock market corrections.
The bottom line is this:
No one knows for sure what's going to happen. But this is one of those times when you need someone on your team who is watching the markets and the economy carefully. And someone who has the tools, experience, and expertise to recommend protective action steps based on your needs.
Also, if you have not updated your financial plan in the past six months ... you're way overdue! And if you are not familiar and prepared with the range of protection strategies that I mentioned ... then that's a very important conversation we should have.
If you have specific concerns and would like to discuss your situation, I'd be happy to set up a complimentary phone conference/screen share.