Unless you have been out of the country the past few weeks, you are probably aware that the Dow Jones IndustIARl Average (Dow) had its worst two-day plunge since 2018. The Dow, is a stock market index that measures the stock performance of 30 large companies listed on stock exchanges. On February 24, the Dow tumbled 1031.61 points, while the S&P was off 3.4%. The Dow slipped another 879 points the following day and the S&P fell an additional 3.2%. Overall, the Dow was down 6.75% while the S&P slipped 6.6%. The stock market collectively lost 1.7 trillion dollars in value over the two-day period. In other words, it got ugly.
HEATH THREAT
A bona fide stock sell-off took hold of Wall Street after investors spent weeks trying to come to terms with the uncertainty surrounding the Coronavirus (covid-19) outbreak as it spreads into other countries outside of China. There are now 79,339 cases of (covid-19) –The infections derived from the novel strain of coronavirus that reportedly originated in Wuhan, China, last year. According to the World Health Organization, the virus has spread to 30 countries and is responsible for 2,619 deaths. There are fears that the outbreak could have a substantial impact on the global economy.
ECONOMIC UNCERTAINTY
Many US traders are worried how the virus may or could be contained if and when it comes to the US. Fear is the driving force behind the losses. Airline stocks like, United (UAL), American (AAL), and Delta (DAL), were hit hardest wiping out almost 6 billion dollars. Technology stocks in particular are also feeling the heat because so much of China is shut down because of the coronavirus and that is where many technology companies do most of their manufacturing. Technology stocks like Apple (Appl) were hit hardest and was down 10% from its monthly high.
CLIENT REASSURANCE
This is the time when many financial advisors earn their salary by re-assuring clients and talking clients off the ledge by reminding them of investment fundamentals and the importance of staying the course. Most importantly, reminding clients that consistent corporate earnings drive investment success, not temporary emotion. Traders sought safety in U.S. government bonds, gold and high-dividend stocks like utilities and real estate. Furthermore, sound investments
in a portfolio tend to recover more quickly after a massive market sell-off. However, during this very tumultuous time, I have decided to share some professional investment advice for those who may need some re-assurance:
1. Use Professional Money Managers
2. Remind client’s, the key is to remain fully invested at all times by adjusting the asset allocation mix—increasing and decreasing risk as necessary.
3. Numerically quantify expectations for risk and loss.
4. Remove emotion from investing by defining a repeatable and rules-based process.
5. Attempt to identify the current stage of the economic cycle and allocate assets according to their relative attractiveness at that time. This is done by monitoring corporate earnings, money supply as it relates to Interest rates, the Treasury yield curve, as well as studying trends in stock prices.
6. Don’t trying to outsmart the market; simply try to identify assets that are relatively attractive at given points in the economic cycle.
If you have questions about the stock market or if you want to learn more, please give us a call, at 614-468-1660 for a complimentary consultation.
Darren, a Columbus, Ohio native has earned degrees in Business, Accounting, and an MBA. He has over twenty-five (25) years’ experience in financial services. The Ohio Company, First Union Securities, and Merrill Lynch were instrumental in his career prior to starting his own Wealth Management Firm, Wealth Conscious LLC, (740) 879-9533, www.wealth-conscious.com. He holds his Series 65 and Life and Health licenses. Investment advisory services are offered through Foundations Advisors, LLC an SEC Investment Advisor Representative