Thoughts and ideas by Ronit Rogoszinski, CFP®
Just as we continue to hear of the spread of the coronavirus and the markets continue to experience significant downturns, let’s address these troubling times head-on. As hard as I know it may be, I strongly encouraged you to focus on the long-term plan you may have already developed, and then let’s put this into historical and emotional perspective and top it off with a “what’s next” set of ideas.
The Covid-19 may be new, but market volatility is not, and that patient investors who stay the course have tended to do better over time. According to S&P 500 data from 1950 to 2019, a decline of 10% or more has happened about once every year. And, while market downturns happen frequently they don’t last forever – case in point:
|Size of decline||-5% or more||-10% or more||-15% or more||-20% or more|
|Average frequency||About three times per year||About once per year||About once every four years||About once every six years|
|Average length||43 days||112 days||262 days||401 days|
|Last occurrence||August 2019||December 2018||December 2018||December 2018|
- Assumes 50% recovery of lost value
- Measures market high to market low
- Source: Capital Group, Standard & Poor’s.
The hard part of all this is to place current events in historical perspective.
Keeping a long-term perspective is always important but it’s essential when markets are stormy and emotions are running high. A look at history shows us that while markets react to news events in the short term, they have tended to reward patient investors over long periods of time. Global markets have recovered from the impact of past viral outbreaks which, while the past is not predictive of the future, it does offer valuable perspective.
The chart shows that global equity markets have navigated through seven major viral outbreaks from 2001 to 2020, including SARS, the Avian flu, the Swine flu, MERS, Ebola, Zika and the Wuhan coronavirus. Global equity markets are represented by the MSCI All Country World Index. Sources: Centers for Disease Control and Prevention, RIMES, MSCI. Data as of March 2, 2020. Chart is shown on a logarithmic scale. Total return index levels in U.S. dollars, indexed to 100 on December 31, 2000. Disease labels are estimates of when the outbreak was first reported.
History may not repeat itself, but it does rhyme and since there is nothing exactly like the coronavirus we don’t really know how this is going to play out, but we can compare it to previous outbreaks to help put things in perspective.
What have we seen in the past that may help us look at current conditions more rationally?
2003 — SARS saw 8,000 people infected. It was brought to an end by good hygiene (hand-washing) and environmental factors (warming temperatures), and it burnt out when enough people became infected to build an immunity to the disease.
2009 — H1N1 Flu caused a pandemic in ‘09 and has become a seasonal flu, usually recurring in the colder months.
2014 — Ebola in West Africa ended with human intervention, when the World Health Organization declared a coordinated international response. Countries worked together to administer to the sick, and when a second outbreak occurred in 2018, human intervention made the difference again when treatments developed from the first outbreak were offered to patients.
Numbers and facts don’t take away the fear and concern I am sure you are feeling at this very moment. And while I have been known to say time and time again that the financial journey we will all be traveling through our lifetimes will “inevitably be bumpy”, the red arrows we all see on the screens are still unnerving. This is a time when it is important not to give in to the temptation of making sudden moves during market downturns. Your broadly diversified portfolios are designed to participate in the gains when the market is rising and to attempt to minimize, as much as possible, the declines when markets sell off.
So … while there is no one size fits all solutions to today’s market volatility, we can all use this time to do the following:
- This is a great time to revisit your long-term plan and address new issues that may have come up during this madness.
- Do you have a Will? Who are your trusted contacts in the event of an emergency?
- Make the time to perform a financial checkup on your personal finances.
- List your Assets, list your Liabilities and make sure you are comfortable with how they are titled and the rates you are paying.
- Review your expenses and the prices you are paying to live your life as is.
- Make sure all your income is accounted for and,
- That your overall cash flow (the difference between your income and your expenses) is positive or at least zero BUT not negative.
- If it’s negative you’ll need to do some serious soul searching as to why and what needs to adjusted to align the numbers towards a positive result.
- Check on your accounts and their asset allocation and speak with your advisor if your objective has changed or you’ve realized that you are uncomfortable with level of risk you once felt ok with.
- Use the Volatility to take advantage of opportunities such as taking losses to be carried forward for use on your tax returns.
- But on the flip side, buying up new positions at reduced prices is an opportunity to buy great companies on sale.
At the end of the day, we are all emotional beings who intuitively know that there will always be things we don’t know and can’t control. Over my three decades in the financial services industry I’ve been here before and would invite you to call and discuss your concerns, goals and any additional issue you need help with. You’re not flying alone, together with your current financial advisor or I, we will all get through this storm better for having taken this challenge on and making our lives better for it.
Ronit Rogoszinski, CFP® founder of Women&Wealth Solutions can be reached at
Securities offered through American Portfolios Financial Services, Inc.(APFS) Member FINRA /SIPC. Investment Advisory Services offered through American Portfolios Advisors, Inc. (APA)an SEC Registered Investment Advisor. Women & Wealth Solutions is not affiliated with APFS and APA. Women & Wealth Solutions is not affiliated with APFS and APA.
The MSCI ACWI is a free float-adjusted market capitalization-weighted index that is designed to measure equity market results in the global developed and emerging markets, consisting of more than 40 developed and emerging market country indexes. MSCI has not approved, reviewed or produced this report, makes no express or implied warranties or representations and is not liable whatsoever for any data in the report. You may not redistribute the MSCI data or use it as a basis for other indices or investment products.
The market indexes are unmanaged and, therefore, have no expenses. Investors cannot invest directly in an index.
Ronit Rogoszinski has been demystifying investment strategies for individuals, families and business owners for over 25 years. Specializing in transitioning widows and widowers, pre-retirees and divorced individuals through major life changes, Ronit’s expertise is translated to actionable, prudent strategies that are customized to each individual’s unique situation. As a result, Ronit has become a trusted advisor to her clients, developing lifelong friendships while partnering in the management of their financial plans.