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Investment Update: Did the Market Just Catch a Cold, or Is It Terminally Ill?

The Coronavirus has impacted many communities and economies around the world, not just in countries where the disease is found. I’d like to share our perspective on a few hopeful trends and warning signs we are diligently watching.

First and foremost, we hope for good health and wellness for you and your families.

 

Our Perspective:

As I mentioned in our last update, we anticipated some sort of market correction in 2020.

What we did not expect, was the Coronavirus striking this much fear into our communities and economy. No one knows when the madness will end.

Despite the volatility in the market, we are starting to see opportunities. Instead of continuing to reduce risk, we might be encouraging our clients to take on a little more in the coming weeks.

This is not my first time saying this. It’s crucial to have a strategic Financial Plan. Not only will a plan give you peace of mind, but it will also provide discipline to weather the ups and downs for the market.

During these uncertain times, I can only suggest that you be careful how much the media and noise of every day affect your decision making.

 

Remember, the stock market also tends to overreact to the various noises in the world:

  1. We saw the market turn overly euphoric in January 2020, with little to no justification.
  2. What we see now is the market turning overly depressed due to recent corrections and the abundance of negative news headlines regarding the Coronavirus.

In the midst of chaos and havoc, I encourage you to stick with your long-term goals. Don’t let emotions run your life.

In this update, I want to cover a few areas that could suggest stabilization in the market and also a few caution signs we are carefully watching.

 

Signs of Hope:

  1. A good portion of the stock market advertises yields above those of the 10-year US Treasury:
    Source: Evercore ISI (as of 2/26/20).
  2. Perspective on the recent decline: we just went from euphoria to summer 2019 levels on the S&
  3. Central banks are still providing “punch to the party” by cutting interest rates.
    Source: Evercore ISI

 

Signs of Concern:

  1. The bond market is worried about growth (U.S., not just international).

However, current low rates might keep on stimulating the housing market via cheap mortgages (refinancing, too).

  1. Airline traffic in the US might be an indicator of consumer fears.
  2. Lead indicators for global activity are weak.

Summary:

As we continue to see volatility in the markets, here are a few things you can do:

  1. Don’t let the news control your emotions.
  2. Stay focused on your long-term goals.
  3. And don’t forget that if you have a plan in place, it will give you confidence for your success.

Thank you for your trust in us as we partner on your financial journey with you.

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