We at Titus Wealth hope you are staying healthy.
We know it’s hard, but try to take a deep breath as we work together to get through this. You should know, we have a plan and are working diligently to execute on your behalf. We have outlined a few of our thoughts below.
Our everyday lives have changed dramatically over the last few weeks as we work together to minimize the impact of the COVID-19 pandemic. We know these efforts are necessary, but they also have come at a cost.
Global economic growth has been slowing, the US economy likely will contract temporarily, and US stocks have entered a bear market. Big stock market moves, both up and down, have become the norm, but challenging investors. In short, this has been a challenging period for all of us and I’m sure you’re asking what’s next and what to do.
A Reality Check
While significant market downturns can certainly be unsettling, it helps to view corrections from a wider perspective. This is the 7th correction the stock market has seen within the last ten years. You may remember late 2018, when the market benchmarks fell nearly 20% when the Federal Reserve continued to raise shorter-term interest rates as the U.S. economy strengthened.2
In fact, if we widen our gaze further we can see that this is actually the 27th market correction since World War II.3 Past performance can’t predict future market results, but markets have still managed through the process of price corrections.
The early bird gets the return
Waiting to jump back into the market even a month after it hits bottom can lead to significantly lower gains over time.
Cumulative returns following market bottom
1 year later
2 years later
3 years later
Stayed fully invested through bear market
Moved investments into cash for 1 month
Moved investments into cash for 3 months
Moved investments into cash for 6 months
Lastly, while we haven’t missed the downturn (see chart above-staying invested). We are ready to take advantage of these opportunities in our managed portfolios via cash, short term bonds and rebalancing. This should create wonderful opportunities for our clients when the rebound occurs. Please call if you would like to discuss our strategy further.
Source: Schwab Center for Financial Research and Morningstar. Data from 01/1970 through 12/2017. Market returns are represented by the S&P 500 Total Return Index, and cash returns are represented by the total returns of the Ibbotson U.S. 30-Day Treasury Bill Index. Cumulative returns are calculated using the simple average of returns from each period and scenario. The example is hypothetical and provided for illustrative purposes only and the example does not reflect the effects of taxes or fees. Past performance is no guarantee of future results.