Coronavirus concerns have ended the 11-year bull market. This 20-minute video covers what we know right now about the market with actionable steps for response. The information contained in this video is as of 3/10/2020.
On March 9, the US stock market as measured by the S&P 500 experienced its 7th worst market trading day since WWII.
There are three primary factors currently impacting markets that we would like to discuss:
- Coronavirus. Global tracking of this emerging virus has caused uncertainty and concern for the global economy. Lack of information or coordination of response is hampering forecasts and resulting in unexpected hits to what was previously a recession-free landscape in the US. Visit our first webinar on coronavirus and investments here for more.
- Oil and Energy Fallout. Lack of demand for oil was exacerbated by a dispute between Saudi Arabia and Russia. This has led oil prices through the floor and will impact the US and international energy sector.
- Election in the background. Democrats continue to trudge through the primary season with markets reacting to prediction markets of likely outcomes.
How have investments responded?
- Sharp sell-off in stocks. US markets flirted with bear market territory during trading on 3/9/2020 continuing several weeks of declines.
- Bond yields plunge. Bonds had their biggest percentage decline of yield over the last 70 years as reported by Raymond James. This will impact the future opportunity sets in bond investments.
An investor range of emotions
It’s normal to feel anxiety and frustration when investments are down. Acknowledging your feelings is an important part of the process of making healthy investor decisions. Practice self-care and remember to breathe and focus as you consider decisions.
Actions you can take during this market
We don’t recommend drastic shifts in your investments. Instead, here are proactive steps you can consider today.
1. Acknowledge your emotions and avoid fear-based decisions. An investment process and investment policy statement can help.
2. You may have an opportunity to refinance your mortgage or other debt. Interest rates are near historic lows. Evaluate costs, anticipated length of ownership, etc. vs. potential savings with interest rates.
3. Consider tax-loss selling if you’re an investor with a taxable investment account. Learn more about winning tax strategies in our video on Tax-Aware Investment Strategies.
4. You may want to consider converting some of your traditional retirement account assets to Roth IRA while investments are down. When converting into Roth accounts, you put in cash and then typically invest. Converting at a lower price can save on taxes if investments grow after conversion.
5. There may be opportunities to accelerate contributions to college savings and retirement accounts. Buying more while lower and taking contributions off of auto-pilot (or naturally waiting until later in the year).
6. Accelerate gifts. For high net worth investors who are looking to reduce their taxable estate, gifts now may have more bang for the buck.
7. Review your investment strategy and maintain your process. If you’ve bailed on your investment process, it’s time to consider whether it was a process at all. Remind yourself why you adopted a process and review your investment policy for adjustments.
8. Rebalance. If you have a process, the time to rebalance back to your preferred mix of stocks and bonds is likely approaching. Maintain your discipline.
9. Mitigate risk. How can you reduce risk in your financial plan? Sticking to tried and true strategies like consistent saving and prudent withdrawals can help. Cash is always valuable and we always recommend the maintenance of emergency reserves.
About the author: Melissa Joy, CFP® is the founder and financial planner at Pearl Planning. Pearl Planning has two locations in Dexter and Grosse Pointe, Michigan. To learn more about Pearl Planning’s services, schedule an introductory phone call.
Required disclosures: Any opinions are those of Melissa Joy and not necessarily those of Raymond James. This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted. Additionally, each converted amount may be subject to its own five-year holding period. Converting a traditional IRA into a Roth IRA has tax implications. Investors should consult a tax advisor before deciding to do a conversion. Rebalancing a non-retirement account could be a taxable event that may increase your tax liability. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. Pursuant to the FA/branch’s Independent Branch Owner Agreement with RJFS, the FA/branch is responsible for assuming all liability for the legal risks associated with any potential intellectual property infringement that may arise as a result of the FA/branch’s use of this content. As such, Raymond James recommends the FA/branch seek independent legal counsel related to the potential legal risks.