It was a Black Monday on Wall Street as the Dow Jones Industrial Average plummeted more than 2,000 points and the S&P 500 lost 7% of its value.
Investors were spooked over the spread of coronavirus, with more than 111,000 infections and nearly 4,000 deaths now reported around the world. Domestically, several states including California, New York and Oregon have declared states of emergency to deal with the worsening outbreak.
Meanwhile, adding to the nerves was the news that Saudi Arabia would continue pumping out more oil despite weakened demand around the globe. That headline sent oil prices down and some are now forecasting they could settle around $20 a barrel.
Make no mistake about it: These are scary times. Today was the worst decline in the market since December 2008, the height of the Great Recession.
But should you go into full-on panic mode and move to cash? Is now the right time to sell all your stock? Are more financial shocks still yet to come?
Our team spoke with certified financial planner Wes Moss and he put the frightening market moves into context.
“We have had a very placid few years in markets without significant or scary pullbacks. So let’s do a quick reality check on pullbacks. Yes, they are common. In fact, in 20 of the last 40 calendar years (that’s 50% of the time) the S&P 500 saw a double-digit pullback within the year,” Moss pointed out.
“In every year, there was a market pullback and on average the market experienced a 13% decline. In the years when the S&P did experience a double-digit decline, 12 of those 20 times — or 60% of the time — the market ended the year with a positive return.”
So until things recover, Moss recommends limiting risk by keeping your portfolio well-diversified.
Meanwhile, Clark echoes Moss’ sentiment — further aiming to be a voice of calm and reason when everyone else is panicking.
“We don’t know how much the stock market is going to decline through this process,” he says. “The stock market has had a long, long, long upward trend. Stocks were, in a polite way, fully valued — probably overvalued — leading into this era of uncertainty.”
“Investors hate uncertainty, and until the dust clears from coronavirus, the market is going to be bumpy. As long as you are invested for the right reasons — saving for your long term — and your money is diversified as it should be appropriate to your age, you just ignore the headlines and hang in there.”
“Markets, even after a painful decline, eventually recover. The younger you are, the more a decline in the market ultimately makes you money down the road because you’re buying everything on sale for what — over your working lifetime — will probably recover many times over.”
Read the full article here.