March 9, 2020 – Marc and Marion share a letter sent to Freedman Financial Clients
After experiencing volatility in the stock market due to the Coronavirus, today we faced another wrinkle – declining oil prices. OPEC members have not been able to agree on oil output and prices, adding more uncertainty to the already skittish stock market. With the market declines today, we are approaching “bear market” territory, a decline of 20% or more. This tends to occur about every 6 years. We have not actually hit the 20% decline number since October 2011. We got close on December 24, 2018, but the market rapidly turned around. In both 2011 and 2018, the market recovered in a few months’ time.
To provide some perspective, the following is an explanation of the news items.
The Coronavirus (Covid-19) is part of daily discussions, news feeds and social media postings. If history can provide any reference, we know that once viruses are managed, markets respond positively – and sometimes quickly. (Take a look at the chart below)
OIL PRICES – The markets have not been kind to oil/energy stocks for more than 12 months. Today’s move is an indication of how fickle oil prices move when competition gets heated. On a positive note, consumers should expect to see even lower prices at the pump.
INTEREST RATES – The Fed’s decision to reduce interest rates by ½ percent last week, proved an ineffective attempt to mitigate additional downward pressure on the markets. It’s possible that the Fed may take further action with hopes that it can help stimulate the economy. What do lower interest rates mean for us? Expect mortgage rates to drop below 3%. It may be a great opportunity to consider refinancing your home, borrowing money for a home project, or consolidating student loans.
THE MARKETS – Sometimes all it takes is a simple chart to remind us how often markets wobble, and how quickly they rebound. Our advice for investing remains the same today as it was one year, 10 years and 30 years ago. One key to financial success is to construct a well-balanced portfolio that performs well over time. Do not invest to ‘beat the market’, ‘time the market’, or speculate. History hasn’t been wrong yet. Patient investors are well rewarded. That even applies for those who are taking reasonable monthly distributions from their accounts.
At Freedman Financial we are here to answer your questions and revisit your overall financial plan. You should know that helping you achieve your financial goals and dreams is our number one priority. We are here, even in challenging times, to offer a welcome ear and financial advice in a language you can understand.
Remain Calm. Stay strong and carry on.
Marc & Marion
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