Stocks Extend Fall to Cap Worst Week Since 2008

You are no doubt painfully aware of the market drop last week. A chart of the past five days looks like stepping off a steep cliff. By the time markets closed on Friday (28-Feb), the Dow had lost 12% for the week and the S&P had lost 11%, their worst week since October 2008, during the global financial crisis. Yields on the ten-year Treasury Bond plummeted to an all-time low. Oil prices dropped to their lowest level since December 2018.  And gold, usually a haven amid nasty stock market sell-offs had its biggest fall in years. If there was any good news, it was bittersweet: losses were smaller on Friday than they had been all week. 

Growing anxiety that the Coronavirus will wreak havoc on the global economy deepened the world-wide market selloff. Noting that the virus has now spread to at least 56 countries, the World Health Organization declared the virus a “very high” global risk. 

Whether the costs of the outbreak turn out to be historically large or not, there is plenty of emotional trading happening right now. It’s easy to be sucked into the vortex of swirling news, but to make money on chaos is virtually impossible for most investors, including professionals.

Long-term thinking is always the right perspective. You may be worried about all the cross-currents, but staying the course and remaining disciplined is your best course of action unless your timeline, risk tolerance, or financial needs have changed.

This is not to discount the severity of this health crisis and its very real human and financial costs. And further market turbulence should be expected. But be reassured that the markets are working the way they are supposed to and always have.

As Ron Lieber reminded readers this week, “Stocks are how your savings fight inflation, the market is not an absolute proxy for your personal finances, and you’re playing a long game.” (Freaked Out by the Stock Market? Take a Deep Breath, New York Times, 26-February).

Nonetheless, if you are concerned about the volatility and are wondering whether or not a change to your asset allocation is warranted or just want to talk, then contact me. I am here to help.