We are experiencing more volatility in the markets recently than we have been used to seeing. Markets the world over are down the past few days, as a result of all the headlines regarding the coronavirus outbreak. Social media is adding more fuel to the fire and escalating matters.
The cost in human health is bad enough, but investors are also concerned about what this outbreak means for their investments. Here is some insight:
- Most experts agree that clearly there is a short term concern for global growth rates. Certainly, the travel industry is being affected until the virus is contained.
- History suggests that, as the threat fades, economic growth resumes, often supported by some form of government stimulus.
- Panic is a very human emotion, but never a good investment strategy.
- Warren Buffett was recently interviewed and he cautioned against “trading the virus headlines.” The real question should be whether or not we think the 10- to 20-year outlooks for businesses have changed in the last 24 to 48 hours.
- We couldn’t agree more. Your portfolio is built for the long-term and should weather any short-term conditions that come and go. You are also reminded that you own several mutual funds, with qualified portfolio managers who make the regular buy and sell decisions for your funds. They obviously know what is going on with the recent virus outbreak, and are looking to mitigate any short-term damage if possible, but also to take advantage of any opportunities that might come up. For example, a couple of medical companies have quickly created testing kits to test for the virus. Should they be invested in?
- If you are drawing income from your investments, then you have cash and fixed-income investments in your portfolio that will protect your income and your long-term portfolio value during this volatile time.
It's hard to sit still and do nothing while all the headlines and social media are screaming warnings! But the fact is that we have already done the work ahead of time, building a solid portfolio that meets your short- and long-term needs, so that all we have to do now is stay the course.