Letter to Our Clients – March 6, 2020
March 6, 2020
Dear Clients and Friends,
This likely won’t come as news to you, but we have seen some volatility and some declines in stock market values this week, which have been fueled by news of the unexpected coronavirus (specifically, the COVID-19) outbreak. The highly publicized outbreak and possible pandemic is causing shutdowns and quarantines globally. Many countries and economies have been disrupted, and it is uncertain what the long-term effects will be. One possibility is a global economic slowdown, which is really what is driving the current market declines.
There are many headlines and news articles referencing the effects of COVID-19. When we read headlines, we often find they are alarming and sometimes can be misleading, which is why we want to always dig deeper into the heart of the message the articles are trying to convey and understand the authors’ perspectives. We do not want to allow these headlines to spook us in any way, as we are disciplined investors.
As it relates to the markets and the increased volatility of this week, is this unexpected? We would argue that it is not. Stock markets have been performing well for the past several years and we have been cautioning clients that a drop in values and increased volatility could happen at any time and likely for reasons that no one, not even the experts, had foreseen.
With this in mind, we have worked with you to develop and implement investment strategies that are prepared to weather the always uncertain markets. We generally do not recommend a change in those investment strategies unless there has been a significant change in your life, financial or otherwise. These investment strategies have been designed after an examination of your short and long term needs, goals, and risk tolerance. Unless something has changed, we would encourage you to continue with the strategy now in place.
Even if we see lingering economic effects of this virus, we cannot know how long or short those effects may last. This is why we never try to time the market, and why we work with you to decide on a strategy and stick with it. We don’t know if values will drop lower from here, or rebound tomorrow, and that is the reason we do not recommend acting on an uncertain future.
However, we always want to be certain that you are comfortable with the strategies that were agreed upon and implemented. What we wouldn’t want to happen is for your account values to drop far enough that you are feeling uncomfortable, and then want to make a change in strategy when values are down. We want to work with you to ensure your current investment strategy is compatible with your tolerance for fluctuation risk, and still aligned with your goals and needs. If you feel you may be uncomfortable with how your portfolio is structured, now is the time to make a change, while markets are still relatively high.
If values continue to decline, it could actually be viewed as an opportunity to rebalance your portfolios back to their stock to bond ratio targets, so that we would be purchasing stocks when they are at cheaper prices. Don’t we all love a good deal?!?
We have helped you plan for this kind of volatility and for potential further downward moves, so from an investment and financial planning point of view, we do not see a need to be making changes. However, if you are feeling uncomfortable, please reach out to us so we can discuss your accounts with us.
Like always, we are cautious, we are watching, but we want to make sure we do not overreact, as these declines and volatility are normal and should be expected throughout market cycles.
We are always happy to hear from you, so please reach out if you have any concerns, or would like to talk about rebalancing. Thank you for the continued opportunity to work with you.
Traci Nelson, CFP®