February 25, 2020
The past few days have been challenging for the markets. And as the number of Coronavirus cases outside of China jumps, there still may be more turbulence in the weeks that follow.
Like any virus outbreak, the fear of the unknown creates uncertainty. Market overreaction is normal, and so too is speculation. We believe that while the virus is serious, it does not pose long term risks to your portfolio, and your overall financial plan.
When one looks back at other major global outbreaks over the last three decades (SARS, bird flu, swine flu, Zika, mad cow, etc.) we learn that the impact to the US and global economies tend to be short-lived. We believe the current outbreak will follow a similar path, although uncertainty remains. The Coronavirus has spread more quickly than SARS (the most comparable outbreak) however the policy response has been more aggressive, and the survival rate has been higher.
Historically, the S&P 500 experiences average peak-to-trough intra-year declines of about 11%. In other words, the S&P 500 has fallen 11% at some point during most years before ending higher. This latest pullback is just over 7%. That’s still well within the normal range of market volatility. In fact, on average the S&P 500 experiences around three to four pullbacks of around 5-10% each year.
For those with cash in their accounts, we’ve used these past few days as buying opportunities. For those fully invested, we encourage you to view the past few days as normal turbulence. At Freedman Financial your portfolios are designed to align with your financial planning needs. If you’re in the accumulation phase of your life, keep adding money. In fact, double up if you can. If you’re in the distribution phase, (drawing money from your accounts to support your income), know that your portfolio is designed to keep your checks coming, while we manage the bumps along the way.
As always, if you have any questions, please don’t hesitate to contact our office.
Marc S. Freedman CFP®
President & CEO
Marion B. Gilman, MBA, CFP®
Executive Vice President
Tracking # 1-965232
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