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Market Update: Stay Calm, Stay the Course
- By Anthony Ciccone, President
A message from Anthony Ciccone, President
Many of you are feeling concerned about the unprecedented events we are experiencing, and specifically, the severe impact on the financial markets. Three months ago, no one knew what COVID-19 was; now it is impacting everyone. This is uncomfortable; we are all feeling the angst. The ups and downs of the stock market over the last few months are a great reminder as to why being well-prepared is essential.
Perspective is vital in times like this. Throughout history, there have been dramatic upswings and downswings; but it also leads to lessons on what we should do and not do, when it comes to our investments. Here are three things everyone must think about.
- Context is key. Over the past decade, the S&P 500 has averaged an annual return of 13.8%. The S&P 500 is now giving up years of returns, and it feels scary. What we can control is our own actions. Everything else is out of our control. The best thing to do is be well informed, have patience, and trust the process of your plan.
- Please stay invested. Over the past 11 years, we have seen very little volatility. The start of this extreme volatility, which started around one month ago, was only the 6th real drop in 11 years. Before this, the most significant drawdown was in 2018 (20%). Corrections are typical market behaviour. Being comfortable with market fluctuations is important as you should not be chased from the stock market, especially if you have a long-time horizon.
- Diversification. We are exiting a cycle of low volatility, scarce drawdowns and high investor complacency. Many people, wanting to take advantage of the extended period of growth, didn’t see the purpose in owning bonds or negatively correlated assets. March 2020 has shown us the timeless lesson of diversification. There should always be investments in a portfolio that are designed to help when markets don’t go the way that is expected. Losing less right now means recovery is quicker once the markets turn around.
Risk makes everyone nervous, but it is also where the return comes from. As it works against our investments, as we see now, it can be abrupt and scary. True wealth is built by being disciplined in our plan and investments.
Staying true to your plan, staying invested and staying diversified will be the most opportune way to weather the coming storms and capitalize on gains once the recovery emerges.
If you’d like to discuss your account one-on-one, please feel free to call us at 604-688-5559.