When did you first notice that something unprecedented was occurring with the Covid-19 virus?
I currently live in Washington D.C. and up until last week there were no noticeable differences in day to day life. However, I recognized the unusual nature of this situation last week when I headed down to Trader Joe’s to stock up on groceries for the next few weeks. Millennial that I am, I thought that if I got to Trader Joe’s 5 minutes before the doors opened at 8:00 AM that I would have the place to myself – I couldn’t have been more wrong.
I found myself walking up to a crowd of about 30 - 40 people waiting for the doors to open. Within 10 minutes of the doors opening, Trader Joe’s employees were forced to lock the front doors because the store was at capacity. After fighting it out with my new friends for our favorite items I spent a solid 40 minutes waiting in line to check out. It took me an hour from the time doors opened to when I left the store, usually I can get my shopping done many times quicker than that.
Every day there are new, unprecedented updates about the virus, steps being taken to “flatten the curve”, economic maneuvering by the Federal Reserve and Government, and the list could go on and on. It is incredibly easy to get sucked into the vortex that is the breathless reporting of these events and allow all that noise to distract you from making sound financial decisions.
Let’s dive into a few key reminders and “rules of thumb” for extreme periods of market volatility:
Do You Know Your Risk Tolerance?-
- Whenever markets are rising ever higher like they did in 2019 it is very easy to believe that your tolerance for risk is whatever return you can receive in the stock market. However, times of extreme volatility are when you truly discover what your tolerance for risk is. Take a few moment now and check your tolerance for risk.
- I would encourage every person reading this to do some thinking about if you are able to stomach what is happening the market around you. After you have thought about how you are feeling, I would encourage you to meet with a trusted advisor who can help put into context what is happening and how you can best prepare yourself for future events.
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- Everyone has a plan until push comes to shove. What has been occurring in financial markets during the past few weeks has been hard to swallow. One good way to avoid getting knocked out by market fear and falling into making a mistake is to remember your plan and why you made that plan – achieving your financial goals.
- Unless you have a goal where you need money within the next 3 months, in most cases conventional wisdom says that it’s not time to sell your investments. Markets have already sold off over 20%+ in recent weeks. We have seen the quickest sell-off into a bear market in history. There very well may be more largely negative days in the markets ahead of us. Brian Wesbury, Chief Economist at First Trust Advisors recently stated that – “A Coronavirus Recession may sound like a reason to sell, but it's not. Stocks typically rise starting 3 - 6 months before a recovery. We're already in that window. Those who sell now are likely to regret it.”1
- During times of unprecedented events like this, it is incredibly important to take a step back, remind yourself of what your long-term financial goals are, and assess if the events flying around you are truly impacting your ability to achieve your goals before making any financial decisions.
If you have questions or are wavering about what to do, call a trusted advisor. If you do not have that advisor, feel free to give our firm a call. And, above everything else – stay safe and healthy!
Creekmur Wealth Advisors may be reached at 309-925-2043 or Info@Creekmurwealth.com.
Citations.
1 - https://www.ftportfolios.com/Commentary/EconomicResearch/2020/3/16/fed-fires-bazooka-at-coronavirus
