The S&P 500 index has fallen almost 30% from a month ago when the concern of the COVID-19 spill-over took hold. Even with drastic measures, confidence retreats. People are feeling uneasy not only about their health, the health of their loved ones, but also their hard-earned savings and retirement accounts.
With endless bad news, a bit surreal, this is one of the fastest falls into a bear market in history. For those of us who went through previous economic cycles, we expect the ride out of this event to be “bumpy”, or more volatile, as globalization and technology innovation had made the world more interconnected:
- information travels faster and more data is available
- innovation in trading infrastructure exacerbated the ups and downs of the market (see wsj article here)
Even with information overload and situations fast-changing, one doesn’t need a crystal ball, or a sage like Warren Buffett (though wouldn’t that be nice?!) to feel an sense of comfort. It has been said many times before that patience and taking the long-term view fare storms well.
In a handy article from the CFA Institute, one is reminded of how to stay the course, and more importantly, why. See especially point 14: “An investor that was out of the market during the top 10 trading days for the S&P 500 Index from 1993 to 2013 would have achieved a 5.4% annualized return instead of 9.2% by staying invested." This difference suggests that investors are better off contributing consistently to their investment portfolio rather than trying to trade in and out in an attempt to time the market.
Also note in a recent report from Morgan Stanley Wealth Management, the market’s current price/earnings (P/E) multiple is at a much more realistic 15.9, vs. at its peak last month, 19.5. As always, we are on the look out to add value opportunistically.
Please feel free to reach out to us if we can support you in any way through this trying time.
Anne & Syl at Uplift Investing
PS. continue to wash hands at every opportunity! Stay healthy and well.
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