Likely, you have been consuming too much news lately, so I wanted to provide you with my thoughts. So, here we go:
- No doubt, a significant drop (like 3,600 points in the DOW) is unsettling, and the media LOVES the headlines – Fear sells.
- The stock market has been pretty “overbought” and ready for “something” to interrupt the run.
- Input has been consistent that the fundamentals of the economy remain strong (low unemployment, solid balance sheets, etc.), and this news alone about the virus spreading is unlikely to “kill” this bull market on its own.
- Likely downside, if this gets worse, is 7-10% (keep in mind this means nothing, as all economists, as well as myself, have foggy crystal balls! But it’s at least educated and research-based guesses).
- Hard to tell where Coronavirus will head- so far the death rate is low (less than 2.5%), compared to SARS at 10% and MERS at over 30%.
- The 10 year Treasury bond today is at 1.279% (the lowest yield in HISTORY…AS IN EVER).
“John, what do we do?”
- GREAT opportunity to “nibble” into stocks if you’ve had too much cash on the side or just sold a business, piece of real estate, etc. It may not feel good, but the best investors buy the big dips.
- Make sure you have an Emergency Fund (3-6 months at least, and maybe 12 months if you are retired); then you can keep your retirement accounts more aggressive, and have your non-retirement accounts more conservative (think 50% stocks 50% bonds).
- If you are a client of ours, we’ve been slowly tweaking down our risk levels and moving money from growth to value (this is why).
- DON’T PANIC- trust the process and your plan you’ve created with a professional.
- Best advice, assuming you have a plan with us or someone like us, is to turn off the news, ignore it, and do nothing- do NOT get caught in short term trading chaos (remember December 2018, fast drop in the market and quick recovery).
Call us, we love what we do, care deeply, and are here to help! 661/775-0950
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