Panic Selling, Feeling the Burn, and What Lies Ahead

Although this isn’t a workout session with a personal trainer barking instructions at all of us, the adage “Short-Term Pain leads to Long-Term Gain” must remain our focus.  Our fortitude, our psyches, and our emotions are certainly going through a workout like we haven’t experienced in a long time.  But it’s all for Long-Term Gain…don’t lose focus.  The past few weeks have been very unnerving for investors, as COVID-19 continues to rapidly spread around the globe. Here in America, the virus’s effects are beginning to feel “real.”

Within the past 48 hours, we’ve seen a number of monumental impacts by Coronavirus. Travel into the US has been restricted, the NBA and NHL have postponed their seasons, indefinitely, Major League Baseball has delayed opening day, and March Madness has been cancelled. Schools are closing, and families are cancelling vacations and delaying purchases. These activities will have short-term economic consequences, for sure, but the real question surrounds how long it will take for the economy (and the markets) to recover.

COVID-19 fears also continue to create extraordinary moves in the financial markets:

• The Dow Industrials dropped some 4,000 points from Friday’s close
• The S&P 500 has lost over 15% this week
• On Monday, oil prices, which were already vulnerable to lower demand because of virus fears, dropped nearly 25 percent on additional news that Saudi Arabia was dropping crude oil prices and raising production.
• 10-year Treasury bond yields touched all-time lows, as unnerved investors sought stability. 10-year yields are currently at 0.73%.

Right now investors are scared to death, and the markets hate uncertainty. There could be several more weeks of panic selling, coupled with some rebounds along the way. The markets will eventually stabilize and find a bottom.  This is not a question of if, but when.

In times like this, many find it difficult to stay committed to their investment plans, but a quick look at recent history should help you keep this week’s events in perspective…Long-Term Gain.

Remember February 2018, when the trade dispute with China rattled the markets? In just six trading days, stock prices went into a 10-percent market correction. That was short lived!

Or how about the 4th quarter of 2018? In October of that year, the Dow saw an 800-point drop, largely due to rising interest rates and global economic concerns.

Then in December, the Dow lost 600 points on Christmas Eve, only to rise 1,000 points the day after Christmas. From peak to bottom, the Dow lost nearly 20%, but eventually it rebounded!

After the terrorist attacks on 9/11, there was a period of fear and uncertainty that drove the markets lower. As Americans, we grouped together, and the markets recovered. Those “workouts” for the markets and our perseverance as investors certainly left us sore the next day, but the growth, thereafter, was well worth the short-term pain. The COVID-19 virus is a valid concern, but the markets have survived wars, presidential assassinations, terrorist attacks, pandemics and much more. The markets will bounce back.

The good news is that we have a plan. We continue to hold a portfolio of quality stocks, bonds, and alternative investments. We believe that diversification and asset allocation will help you reach your long-term goals. It’s important to remain disciplined and not let short-term fluctuations in the market result in rash decisions that may jeopardize your financial future.

So, if you find yourself getting anxious and feeling like you can’t finish this workout, know that we are here to help you and your family answer any questions that might arise. Don’t let fear get its grip on you. Now is the time to have have faith, because this too shall pass!

Any opinions expressed in this forum are not the opinion or view of American Portfolios Financial Services, Inc. (APFS) or American Portfolios Advisors, Inc.(APA) and have not been reviewed by the firm for completeness or accuracy. These opinions are subject to change at any time without notice. Any comments or postings are provided for informational purposes only and do not constitute an offer or a recommendation to buy or sell securities or other financial instruments. Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purposes of avoiding penalties that may be imposed by law. Each tax payer should seek tax, legal or accounting advice from a tax professional based on his/her individual circumstances.
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