LGT ProfitSense Insights

FA Market Update - May 15, 2020

Written by Miller Bentley, Financial Advisor | May 15, 2020

As the month of May rolls on and life continues to return to “new normal” for some, the questions seem to mount by the hour for those keeping up with the markets. Previous updates have stressed the extreme volatility at play since the COVID-19 breakout, along with the economic downfall that has shown only more glaring signs of turmoil as US businesses have sputtered at re-opening.

While important to understand that equity markets are unstable and the economy will take an extended amount of time to recover, there are a finite amount of factors that an individual can control in an effort to stabilize the markets and shorten economic recovery time.

In most cases, a well-rounded financial plan can weather the storms of economic recession and market downswings with time, that’s why “analyze the minutia of pandemic-induced volatility” and “solve all problems with the economic outlook” are missing steps in the comprehensive financial plan.

 

As noted in last week’s update, time in the market increases chances of meeting financial goals versus timing the market.

 

Likewise, being an informed investor and in-touch with personal goals are necessities, but being an emotional investor can be deleterious to financial and psychological well-being.

News from Washington made headlines early in the week. First, on Tuesday, renowned Dr. Anthony Fauci delivered a grim outlook to government leaders on the negative affect’s re-opening businesses for public use can have on the battle against coronavirus.

The equity market rally halted the next day when Federal Reserve Chairman Jerome Powell reiterated previous sentiment from the central bank’s believe that a slow economic recovery is inevitable as the US has breached previous historic low records.

Powell painted a picture of what the economy might look like with further government stimulus inaction, highlighting the need for more fiscal help to carry businesses through an uncertain re-opening period. Powell’s words resonated through the market sell-off Wednesday, resulting in a -2.41% decline in the S&P 500 index.

Thursday’s jobless claims report of 2.981 million new filings added to the downward momentum of the market in the morning, but investor sentiment rallied throughout the day to post a +1.15 gain for the day, yet down -1.84% through the week for the S&P 500 index.

And taking a step back from the previously mentioned market minutia – the S&P 500 index is down -11.71% year-to-date, and just -0.83% over the past year.

We have experienced volatility like most have yet to witness before in 2020, but even an S&P 500 index fund investor would be reaping the benefits of remaining invested throughout the market ebbs and flows.

Establishing control over your time in the correct investment market through a well-rounded financial plan eliminates a majority of the “what if” questions raised by the uncertainty brought about by this pandemic.

 

The ability to monitor what can be controlled is paramount to reaching financial goals.

 

Specifically, assessing personal risk tolerance that translates to a dedicated asset allocation strategy subject to periodic rebalancing.

Additionally, maintaining – or establishing – responsible spending habits throughout times of economic uncertainty requires strict self-control. Like the premise of financial health controls, the CDC and other scientific experts have offered many guidelines for the fight against coronavirus that are personally controllable.

Spending time worrying about answering the thousands of questions pertaining to economic uncertainty, oil price and productivity, the shape of economic recovery, and the coronavirus outlook is not only exhausting, it is mostly out of one’s personal control as to what the answer will be.

This is not to discredit the importance of the questions being raised, but the answers will eventually present themselves in one way or another. Different answers have different results on investors, but the investor with a plan that answers the personal questions in relation to their own wealth almost always generates a portfolio prepared for the answers to the uncertain questions.

One cannot predict the future, especially in these current unforeseen times, but addressing the pertinent personal questions will help make the path to financial success more achievable with less anxiety.

 

 

 

For anything additional, please contact any one of our financial advisors or visit our website. Stay informed about future developments by frequently visiting our COVID-19 Financial Updates page.