Yesterday we reached two unwelcome milestones. The global coronavirus was labeled as a pandemic by the World Health Organization and the US stock market’s decline is now in bear market territory. (A bear market is any market that has declined 20% off of its highs.) Additionally, if you live in the Seattle area, the announcements from Governor Inslee regarding emergency actions to contain the virus are potentially upsetting as well. Without question, these are difficult times.
Given all of the uncertainty, there is little clarity for how broadly this will impact global financial markets. However, most financial analysts are downwardly adjusting economic growth forecasts. While the individual projections vary, most agree on a few things:
- The economic damage will be most severe in specific sectors (e.g. travel and airlines). This provides a very good reason to maintain a well-diversified investment approach.
- The economic effects are likely to be somewhat short-lived. While this virus has the potential to harm individuals, its global spread will eventually decline and economic life will get back to normal. It will move like a firestorm for a few months, and then people will go back to work and buy and sell things again. Hopefully this statement does not sound too clinical or cold. The virus is a horrible thing with massive consequences for individual human lives, and we do not intend to minimize the human toll, but economically things will go back to normal.
In uncertain times like this, history tells us that it is best to focus on practical actions than on trying to determine exactly where things are headed. With this in mind, we are actively seeking tax loss harvesting and rebalancing opportunities for your portfolio and have been reaching out to you as we identify specific trades. (See attached illustrations that discuss each of these topics.) Given the ever-present potential for markets to fall further before they stabilize and recover, this is a good time to talk a bit more about what to expect from here.
Paracle Personal Financial Management is an independent financial planning firm founded in 2004 with an honest desire to help people optimize their finances by providing unbiased financial planning and investment advice that puts their clients first. Paracle specializes in delivering expert, comprehensive wealth management services to busy families. Their expertise integrates financial planning with investment management to ensure their clients experience confidence in every aspect of their plan so they can focus on what matters most. To learn more about Paracle, connect with them on LinkedIn.