The coronavirus is here. It’s impacted every corner of American life and is likely to continue to do so. Colleges have closed. States are closing schools and banning large gatherings. Businesses are closing or cutting hours. Consider some of the stunning developments from the past week:
- The NBA, NHL, and Major League Baseball suspended their seasons. 1
- Disneyland closed through the end of March. 2
- The NCAA canceled its men’s’ and women’s’ basketball tournaments. 3
- States are closing schools and banning large gatherings. 4
Worldwide, as of Friday, March 13, there are more than 139,000 confirmed cases of COVID-19, which stands for coronavirus disease 2019. More than 1,800 of those cases are in the United States, with 135 new cases in the prior 24 hours. 5
The pandemic has had a significant impact on the economy and the stock market. On Friday, February 21, the Dow Jones Industrial Average (DJIA) closed at 28,992. On Thursday, March 12, the DJIA closed at 21,200. That’s a decline of 7,792 points, or 26.87%, officially putting the stock market in bear market territory.
What can you do to protect your nest egg from the coronavirus? There’s no way to predict the movement of the stock market, especially in the short-term. However, there are a few things you can do to minimize your exposure to risk.
Don’t panic.
It may be tempting to sell all your investments and look for safety. However, take some time to explore your options before you make an impulsive decision. Bear markets happen, but they’re temporary. The average bear market lasts 13 months and is followed by a 22-month recovery. 7
However, not all bear markets last that long. The 1987 bear market that contained the famous “Black Monday” crash lasted only 3.3 months and was followed by a 30-month bull market. The 1990 bear market that was triggered by the Gulf War lasted 2.9 months and was followed by a 113-month bull market that saw the S&P 500 rise by 417%. 8
Of course, there are longer bear markets as well. The 2007-2008 bear market that was triggered by the financial crisis lasted 17 months. It was followed by the bull market that just ended, which lasted nearly 11 years and saw a 400% increase in the S&P 500. 8
It’s impossible to know how long this bear market will last or how far the markets will fall. However, if history is any guide, the bear market will end at some point and the markets will recover. If you pull completely out of your investments, you may miss the recovery and the beginning of the next bull market.
Review your allocation.
When’s the last time you adjusted your allocation? Many people become more risk averse as they become older, even without the threat of the coronavirus. You don’t have to sell all your investments to reduce your risk. You may be able to achieve that goal by making slight changes to your allocation.
If you haven’t adjusted your allocation in years, now may be the time to do so. You may want to slightly adjust to assets that are historically less volatile. A financial professional can help you find the right allocation for your risk tolerance.
Consider risk protection tools.
There are some financial vehicles out there that are immune to the coronavirus, and all other forms of market risk for that matter. For example, there some types of fixed annuities that allow you to earn interest based on a stock market index’s performance. If the index performs well, you may earn more interest. If it performs poorly, you don’t lose money. Again, a financial professional can help you determine if these tools are right for you.
Ready to protect your nest egg from the coronavirus? Let’s talk about it. Contact us today at Oliver Asset Management. We can help you analyze your investments and implement a strategy. Let’s connect soon and start the conversation.
Advisory services offered through Change Path, LLC a Registered Investment Adviser. Change Path, LLC and Oliver Asset Management are unaffiliated entities.
Annuities contain limitations including withdrawal charges, fees and a market value adjustment which may affect contract values.
Annuities are products of the insurance industry; guarantees are backed by the claims-paying ability of the issuing company. Guaranteed lifetime income available through annuitization or the purchase of an optional lifetime income rider, a benefit for which an annual premium is changed.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
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