Why is the CoronaVirus Affecting The Markets?
With non-stop news about the coronavirus, the markets over the last two weeks have become very volatile, surging and retreating. After very strong gains in the markets in 2019 and early 2020, the Dow Jones and
S&P 500 are currently both down about 14% over the last two weeks.
Why are the markets so volatile?
There are several reasons:
· This coronavirus was a surprise to everyone, including the markets, so it was shock to the system.
· With China being the epicenter, investors have become concerned about the supply chain implications and potentially serious disruptions coming out of China and other parts of the world in our interconnected global economy.
· Non-stop media coverage. As a medical professional client of mine pointed out, people become concerned about things they do not understand. In this case, we know what the coronavirus is, but we do not yet fully understand how it manifests itself.
Why are there pullbacks in the markets?
Pullbacks in the markets are a normal course of events, with most years having one or two retracements where the markets are down 5 to 15%. So, this pullback is not unusual or unprecedented, actually far from it. Some of these pullbacks last for weeks, but generally, they are over pretty quickly.
How is my portfolio positioned?
As you know, we typically use cash to protect your portfolio, as a moat protecting the castle. As appropriate for you, we will invest the cash to keep your portfolio on course.
What should I do?
Normally, the best thing to do is to stick to your (our) strategies and avoid emotional decision making, because when you look at the information gathered from past epidemics, the data suggests that after corrections the market will bounce back to new highs.
Please don’t hesitate to call me at 415-287-5105 if you have any questions or you would like to discuss this topic further.
