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COVID-19 and the Stock Market: What You Need to Know Now

It’s been wild couple of weeks in the stock market. There is a lot of noise and a lot of distraction right now. With 24/7 news coverage, social media and sensational headlines right at our fingertips around the clock, there is a lot of stress, there is a lot of emotion and there is a lot of worry. Worse of all, there is a lot of confusion about what is going on. 

To help alleviate the fears many of our clients are experiencing, I wanted to discuss 3 main things you should know in this unprecedented time: Be safe, we are here for you, and your individual portfolios are going to be OK.

1. Be Safe 

First and foremost, we must all be safe during these times. The reason this health threat is so scary is because this virus is so contagious. It’s important, even if you don’t fall into what the Centers for Disease Control and Prevention (CDC) considers to be high-risk, that you practice social distancing when possible and that we all take this threat seriously. The sooner we stop the spread of COVID-19, the sooner we can all go back to our regular schedules. 

Here’s what recommended: 

  • Stay home!
  • If you must go out, maintain a 6-foot distance between others when possible.
  • Wash your hands regularly and thoroughly.
  • Wear gloves and/or a mask when in public.
  • Keep away from people who are sick.
  • Take care of yourself.

It’s important that we all do our part.

2. Our Continuity Plan

At Rock House Financial, we want you all to know that we are here for you. While everyone is encouraged to stay home, we are available to meet with you virtually. You can go to our website to schedule a time to talk, or you can contact your advisor directly to get on their schedule. You can reach out to us at any time, and if we are available, we’ll talk. You can connect with myself, Nicole Roberts or Zach Nelson directly to talk through your personal situation, review your portfolio, discuss how much safety and liquidity you have built into your portfolio and go over your performance so far, versus what the total stock market has done. 

We will also be here physically to serve you during this time. We are staggering our staff so we won’t cross-contaminate one another with a virus and hopefully be able to continue to serve you throughout this crisis, even if one or two of us get sick. 

 

Have questions? Contact us. Rock House Financial is here for you and ready to discuss your concerns.

 

3. The Stock Market and Your Portfolio

As far as the stock market goes, I wanted to put a few things in perspective; things I think are worth reviewing. 

As of right now, the stock market has gone down by more than 30 percent. Where this ends, how long it will last and how deep this goes, we don’t know. I wish I could provide some assurance on that, but what we can do is look back historically to try to provide some context for why we implement the strategies we do and why we have safety built into your portfolio, spanning a period of time so if you do need money there is money available on a safe basis, whether you’re taking money out on a monthly basis or talking through emergency-type situations. 

Let’s take a look at some historical data.

If we look back in time at what’s happened in the stock market, you can see that back in 2008, the market went down by 51 percent. We’re nowhere near there yet. It certainly could go down that far, but I don’t think it will. 

The good thing to remember is that there is a base on the economy that keeps it going. There is still going to be food service. There are still medical services being provided. A lot of people are working from home. So the economy will continue on. That doesn’t diminish the fact that several people will be losing their jobs, there will be layoffs and, I believe, we are certainly going to hit a recession. But there is a base level to which the economy will continue to function. 

In 2008, we also experienced a bear market. It lasted 16 months. If you go back to 9/11, that bear market lasted 25 months with a 45 percent decline. Prior to that, you have to go all the way back to October 1987 – Black Monday – where the market fell, but it only lasted three months. Then we had a 21-month bear market in 1972/1973. There was another in 1970/1971. And then you go clear back to the Great Depression. 

You would hope that we have the right financial institutions in place – modern systems for monitoring interest rates, policy and economic stimulus if we should run into a Great Depression situation. 

What’s interesting to me is what happens after a bear market. 

One year after the above bear markets, the market was typically up 11 percent. After a three-year period, it was up an average 10 percent. After a five-year period, the market was up an average of 9 percent. I think that’s really heartening when you think about it. These things don’t last forever. All is not lost, in particularly for you individually, as I have reviewed all of your portfolios and looked at them as we talked one-on-one. There is enough safety and enough liquidity built into your portfolios that there shouldn’t be any one panicking. However, I know these fears are real, and we want to talk through them with you. 

Please don’t hesitate to contact us so we can talk though your portfolio and your individual situation. 

The bottom line is, we want to wish you a very healthy time. Stay safe!