Coronavirus Fears Cause Markets to Drop: The Importance of Maintaining a Long-Term Outlook | Trust Company of America - Millennium Trust Company

Coronavirus Fears Cause Markets to Drop: The Importance of Maintaining a Long-Term Outlook

March 2, 2020
By Gary Anetsberger

On Thursday, February 27, the Dow Jones Industrial Average plummeted 1,190 points, as concerns about the spread of coronavirus increased. The S&P 500 closed the day 12% below its record high, set just a week earlier on February 19 – its fastest drop since 2008, over the matter of six trading days. As China’s economy – the world’s second largest – suffers, investors across the globe are affected.

Market corrections – defined as when a stock market index declines 10% or more from a recent peak – are not uncommon. In fact, market corrections have occurred 37 times between 1980 and 2018. As disconcerting as a steep drop like we’ve just experienced can be, it’s important for investors to not lose sight of their long-term investment goals, or make knee-jerk reactions or rash decisions. Market declines, such as those recently experienced, present investors with the opportunity to reassess their asset allocation and investment strategy.

After a more than decade-long bull market, the emergence of coronavirus has renewed fears about a turn toward a bear market and even a possible recession. As the global economy slows due to steps taken to contain the virus and media coverage reaches a fever pitch, some retirement savers may feel the need to make drastic changes to their portfolios.

But, panic is rarely rewarded in these situations. Whether you’re running a Fortune 500 Company, advising a small business’s 401(k) or reviewing the investment mix of your IRA, patience and a long-term outlook are key.

However, a market correction is a good reminder that having a portfolio consisting of a wide variety of assets can be a recipe for long-term success. Many investors are likely heavily-invested – and perhaps even overweight – in equities, where they have seen outstanding returns for a long time.

For sophisticated investors, alternative assets like real estate, precious metals and private equity can offer different risk and return profiles than traditional assets like equities. These assets are not typically correlated with equity markets and can protect against market volatility.

Ultimately, having a well-diversified portfolio, resisting the urge to make drastic changes in the face of a sudden market downturn and maintaining a focused, long-term investment strategy will help investors maintain a healthy perspective when a market correction or bear market arrives.

To read more about our country’s retirement health, read our whitepaper on the state of Retirement in America in 2020.

To learn more about alternative investments, read our eBook, “Are Alternatives Right for Your Portfolio?

The material in this blog is presented for informational purposes only. Millennium Trust Company performs the duties of a directed custodian, and as such does not sell investments or provide investment, legal or tax advice. 

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