Coronavirus Volatility in the Markets:

A few tips to remember during this time:

  1. Try to stay calm through the ups and downs. (Remember there’s going to be bad years but they
    are balanced out by the abundance of good years.)
  2. See the potential opportunity with market losses. (When your favorite shoes are 50% off, you
    buy extra! Try to think the same with stocks)
  3. Resist the urge to get emotional! (Remember we are long term investors, so as long as you do
    not sell off your investments you are not locking in any losses!)
  4. Don’t check your account too often. (Checking too often may lead us to make emotional
    decisions. Remember you are not touching your retirement accounts, until retirement. So if you
    are in a 5+ time range until retirement your account should indeed recover.)
  5. Remember that your advisor is here to help.

We know with all the COVID-19 worry, markets have been extremely volatile over the past few weeks.
Not only do you have to worry about staying healthy but also worry about your investment balances. We are here to tell you that volatility is normal and it is important to remember that these are just temporary losses. Once business operations and consumer activity normalize, so will the markets. Our portfolio managers expect that the impact on U.S. growth will be short-lived, lasting for about two quarters before we start to see some recovery in the markets. As you can see in the figures below, provided by City National Rochdale, short term volatility is normal and every year has had a point where the market is down.

In the past 40 years, only 8 years ended in a decline. Below you can see how other viral outbreaks affected the markets, how long it lasted and how 3 months later, we were already seeing positive returns.

Figure 1

Source: FactSet as of January 2020.

Figure 2

S&P 500 Return

Viral Outbreak Decline Duration (Days) 3m 6m 12m 24m
SARS -13% 38 15.4% 18.5% 35.1% 44.2%
Avian Flu -6% 141 3.1% 8.2% 14.1% 20.3%
MERS -7% 43 7.6% 16.4% 30.3% 52.3%
Ebola -6% 23 4.0% 8.8% 15.5% 8.4%
Zika -13% 66 7.1% 13.3% 20.0% 51.7%
Average -9% 62 7.4% 13.0% 23.0% 35.4%
Median -7% 43 7.1% 13.3% 20.0% 44.2%

Source: FactSet