Financial Markets Update - March 9

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As of Monday afternoon, all major equity indices are down over 7%, with a massive sell-off at opening bell, causing trading to halt for fifteen minutes. The markets dropped largely due to the sinking price of oil, but also due to concerns over the spread of the coronavirus.

Over the past few weeks as fears around coronavirus have risen, we've seen elevated volatility return to global equity markets.  The downward move has since pushed equity markets into correction territory (defined as a decline of more than 10%).  Likewise, we've seen interest rates plummet to the lowest in recorded history with the 10-year Treasury offering an eye-popping 0.75% as of this morning.

Market volatility is likely to remain elevated given the still unfolding coronavirus situation, as investors grapple with the economic consequences of the epidemic.  While the natural inclination may be to do something in times of heightened uncertainty, we continue to advocate that our clients maintain a longer-term focus and adhere to the diversified target allocation we have in place. Our experience suggests that investors that make dramatic portfolio changes in the midst of events like this often regret them in hindsight.

With a constant barrage of updates coming from all media outlets it is easy to understand how anxiety could be rising.  With that in mind, we thought some additional perspective could be helpful:
  • Since 1980, the S&P 500 Index has had an average intra-year decline of nearly 14% (and yet, the index has posted positive returns in 30 of those 40 years).
  • As noted above, this type of pullback is very common.  In fact, we experienced two downward moves of 10% or greater in 2018.  Similar to the market gyrations we saw in 2018, this year's market pressure comes after a calendar year with strong performance and relatively low volatility.   
We recognize that volatility such as we have recently experienced can be frustrating or unnerving for you. Should you have any questions or concerns regarding your investments, (or markets in general), please do not hesitate to call or email your HORAN Wealth advisor.