Understanding the Coronavirus’ Impact on Your Overall Financial Plan Design
Craig Robson, CFP?, CIMA?, CDFA?
Founding Principal and Managing Director at Regent Peak Wealth Advisors
Due to growing fears of the Coronavirus’ impact on global economies, we have seen the S&P 500 go from an all-time high (Feb 19, 2020) to most recently wiping out the year’s entire gains by declining 12% as of Feb 27, 2020 (FactSet). We remind investors that while it’s never pleasant to experience or easy to predict, over the past 50 years capital markets on average will provide a 10% decline or greater (correction territory) every two years (Yardeni Research 1968-2018). Equally unsettling is both the catalyst for each historical correction as well as its respective recovery time period is different.
Regent Peak Perspective:
We acknowledge what is not different; selling during a correction has historically not been a financially prudent decision. Specific to this most recent market pullback via the Coronavirus, SARS is likely the closest comparison originating from China that affected financial markets. During SARS, the S&P 500 posted a peak-to-trough decline of 14% in 1Q03. But the panic was short in nature: by May 2003 when the outbreak started to abate, the S&P 500 recouped all of its losses, and for the full-year 2003, it posted a strong 26% price return (BofA Research Jan 31 2020). From a broader context, during the 2010s investors who had missed the 10 best days of performance would have realized only 95% of gains compared to 190% for the full decade.
This data validates one of our consistent golden rules when it comes to investing: time in the market rather than timing the market.
Moving Forward:
While it’s impossible to know when the Coronavirus’ outbreak will abate, we do know this: staying invested in the markets while incorporating a broad asset allocation program along with periodic rebalancing of one’s portfolio is the optimal way to most consistently achieve one’s financial goals.
We acknowledge these are unnerving times for investors, we also acknowledge the professionals at Regent Peak stand ready to help you sort through both the market and media noise to ensure you remain directionally on target with your specific financial goals.