Our markets have experienced renewed volatility over the past 3 weeks (it is up significantly this morning). Times like these can challenge investor patience. As Warren Buffet says, “the markets reward patience”. The table below shows the frequency of market corrections are:
While The Virus Grabs The Headlines, There Are Additional Issues:
- Coronavirus – Media
- Federal Bank – Interest Rates
- Recession Fears
Coronavirus – Our markets have responded to the Coronavirus as it works its way through the world. The primary question – will the virus create a domino effect creating sustained economic impact? There is a long history of market reactions to serious virus threats, and historically our markets have overreacted. This time may or may not be different.
Media – The business of our news media is not to inform and educate, but rather to sell advertising. Whether they lean left, right or center, media outlets must attract viewers so they can sell advertising. To effectively accomplish this, the media sensationalizes headlines. Especially in today’s electronic media, headlines drive viewers and we feel the media is adding hyperbole to an already serious situation.
OPEC+ – OPEC and the Russian Oil Ministries (called OPEC+) met over the weekend in an attempt to reduce oil output to strengthen oil prices. The Russians refused to reduce their output (oil remains one of the few Russian exports to shore up their struggling economy). In response to the refusal to reduce oil exports, the Saudi oil ministry announced they would increase oil production to pressure Russia into complying with reduced production. By increasing their exports, the Saudis drove down oil prices and oil company stocks.
Federal Bank – Our federal bank announced last week they would reduce interest rates by 0.5%. The move caught the markets by surprise and increased anxiety about why the federal bank acted so aggressively.
Recession – Behind all these thoughts are questions on whether this strong market over the past 11 years may be coming to an end and yielding to a recession. At this point no one knows, and only time will tell. The biggest variable will be the American consumer, and how they respond as the virus subsides. The American consumer is notoriously fickle and difficult to predict.
Stick to Your Plan
We develop your investment process and refine your financial plan / NESTEGG Score to account for market volatility such as we are currently experiencing. The key is to stick with your plan. We expect continued market volatility and additional media commentary as the virus and election cycles evolve. With your comprehensive plan you should not be concerned about what lies ahead.
Remember your thorough financial plan is designed for performance over the long term.
We are here to help you. Our team has the experience, and expertise to guide you through what lies ahead. If there is someone in your life that would benefit from this, please forward it to them.
Please contact our team with any questions. We are happy to review this plan with you anytime, especially if you have increased anxiety. It can be tremendously comforting to review with us how we have designed your investments for these situations. Wood Tarver 208-343-2001.