Market Volatility - What Should You Do?
Updated: Jul 29
Stock Market Volatility
Most of you are probably aware by now of the recent volatility in the stock market. In light of this, I wanted to take some time to provide unbiased information about what’s going on, and how we’re guiding our clients through this time.
The Market Downturn
Due to global concerns around the Coronavirus, the financial markets have gone through a number of corrections these past few weeks, eventually entering bear market territory earlier this month. To provide some context, a correction is defined as a drop of 10% or more in one of the major stock indexes. Historically, corrections happen periodically, with an average decline of about 13%.
A bear market, on the other hand, is generally a drop of at least 20%, which is where we find ourselves now. In the past century, there have been eight bear markets, lasting from six months to almost three years.
Any time the markets experience a correction, news outlets and social media run rampant with panic-driven news and opinion pieces. However, we’d like to remind our clients and readers that this correction is not a surprise. Market volatility is something every investor must anticipate, and is the reason for the premium returns that stocks produce in the long term.
Although it’s impossible to time the market, many investors and financial planning experts have anticipated a market downturn for some time. In discussions with our clients over the past 6-12 months, we’ve addressed this possibility and performed stress tests on their portfolios to model the impact of potential losses.
What You Should Do
During such periods of volatility, it’s important not to make any rash financial moves; however, it’s also important to be aware of what is happening and understand your options. Working with your financial planning team can help you confirm whether your strategy is still on track, and whether staying the course is still in your best interest.
If you have questions, we encourage you to reach out. We are here to support and guide you through these uncertain times, and to discuss any concerns you may have.