February 28, 2020
Wuhan, a city in China with a population of more than 11 million people, was not known to most Americans before several weeks ago. Now we know that it is the epi center of the outbreak of the Coronavirus. Initially, it was thought that the virus could be confined to China. But since then the outbreak has spread globally to many countries including Japan, Italy, South Korea, Iran, and the U.S. Some cities and countries are restricting travel and preparing for the shutdown of schools and businesses for long periods. It has becomes apparent that this virus will impact mostly China’s production and GDP, but also other countries as well.
Some experts predict that the number of infections will peak in the next several months and dissipate by summer as the weather warms up. However, no one really knows. And the CDC indicates that it could take 12 to 18 months to test and produce an efficacious vaccine.
We urge you to monitor reliable information sources such as the CDC and the World Health Organization for the latest updates.
Economic activity is being affected and fear has crept into the markets. This has turned to panic in the last 5 to 6 days with the major averages dropping about 11%. This, in and of itself, is not unusual. In most years, even when the market is positive, there is an average intra year pullback of 12 to 14%.
SO WHAT SHOULD YOU DO?
- Do not watch the news shows all day long. They concentrate on the headline stories which cause the most consternation.
- Be aware that your portfolios are structured to withstand declines such as these – remember our “Bucket Strategy”.
- Do not bail on the markets. Remember, our plans and portfolios are built for the long term, not just 3 months, or even one year.
- Allow us to do the worrying for you!
WHAT ELSE?
- We are now in “correction” territory – a decline of more than 10%. Corrections are normal every several years.
- Focus on the market fundamentals, which we believe remain positive.
- Volatility is likely to continue for a while.
- The Coronavirus will have a short-term effect on the economy and corporate earnings, some industries more than others, e.g., airlines.
- Financial success is achieved by focusing on long term goals and not letting short term disruptions derail us from our objectives.
- We have great medical care in the U.S.
We are here for you. If you are in a fearful state, call us. We don’t believe you need to change anything in your portfolio.
We are confident in the future of the equity markets and our country!
Spring will be here soon! I am sure we will all welcome it.
Sincerely,
Edward J. Kohlhepp, CFP®, ChFC, CLU, CPC, MSPA
Founder & CEO
Edward J. Kohlhepp, Jr., CFP®, MBA
President
Quote: “In investing, what is comfortable is rarely profitable.” Robert Arnott