Addressing the Fear du Jour
@derstudi
The fear du jour is COVID-19, also known as the Coronavirus. Each of us has a lot to be concerned about, particularly given the uncertainty of epidemics and even pandemics—couple this with volumes of misinformation and fear stoked by the media. Outbreaks of infectious diseases have consistently occurred over the past century; names like Spanish Flu, Asian Flu, Hong Kong Flu, SARS, Swine Flu, Ebola, Zika, and Dengue are just a few. Although unnerving and cause for concern, we are still here today functioning, producing, consuming, and living life.
For the investment community, the concern is less about the loss of life and more about productivity, consumer spending, and growth. With consumer spending in the U.S. making up approximately 70% of GDP, the concerns of an economic slowdown are valid. Important for market participants is the material impact of the slowdown due to a lack of spending. At the same time, furloughed workers and canceled events may harm a company’s ability to make money. Regardless of the situation, company earnings may potentially go down due to the widespread impact of COVID-19—and with it, their stock price often follows.
YOUR FINANCIAL PLAN PREPARES YOU FOR THE UNEXPECTED
It is important to note that these are the current events; we are just reporting the news as we know it today. A financial plan, constructed by a Certified Financial Planning Professional or CFP®, considers the market impact of pandemics, wars, natural disasters, and the like. These situations, although not explicitly named in the financial planning calculations, are implied in the battery of historical market performance tests (called Monte Carlo Simulations). As such, those with a plan (investment, retirement, etc.) should stick to the plan. Now is not the time to go and make drastic changes. As one Human Investing client put it, “Now is when everyone needs a plan and partners they trust to achieve it.”
The worst days of the market may be ahead. Alternatively, the market could bounce tomorrow and be back on track for another stellar year. This is why during volatile times we look to the thoughtfully developed plans we created alongside our clients. In times such as these, we are grateful for each of our clients who have placed their trust in our firm over the last 15 years, and we look forward to connecting with you soon.
Sincerely,
Peter Fisher
