As of 3/16/20, the S&P 500 Index is down around 30% from its recent high. There has been a catastrophic short-term drop in the stock market. That naturally leads people look back and ask why we didn’t sell. After all, we knew this virus was going to be bad, right?
The biggest reason we didn’t sell is because nobody knew how bad it was going to get. We still don’t. Look at the stock market over the past two weeks. Prices are jumping all over the place. Let’s review some of the things we don’t know:
- How many people will be infected with COVID-19
- How many will require intensive care
- How many people will die
- How much all the business closures will slow economic growth
- How each government will stimulate its economy through the crisis
That’s just a start. With so much known, nobody knows whether the market should drop 20% or 50%. At the same time, we are confident that economies will eventually recover. Stocks around the world are likely to recover at some point. We know we want to own them once the recovery has begun.
Now that we agree we are highly confident in where stocks are going long-term, and that we have zero confidence in where it’s going short-term, why would we invest with a short-term mindset? Now is the perfect time to stick with your long-term plan.
Legal Disclaimer: These posts do not constitute an offer or recommendation to buy or sell any securities or instruments or to participate in any particular investment or trading strategy. They are for informational purposes only. CTW gathers its data from sources it considers reliable. However, CTW makes no express or implied warranties regarding the accuracy of this information or any opinions expressed by the author and may update or change them without prior notification.
About the Author: John O’Connor
John has more than ten years experience as an Investment Advisor. He focuses on devising and maintaining portfolios that meet individuals’ needs, investment research, and investment strategy. John has been recognized as a “FIVE STAR wealth manager” by Twin Cities Business Magazine 2016-2020.