The year of the RAT has certainly gotten off to an ironic start. The Corona Virus hit the world and the stock market reacted in spectacular and unprecedented ways. The eleven-year bull market is over. Long live the next bull market!
We at Thrive were not surprised that the bull market came to an end. We were surprised by the specifics, but not that the market would take a turn for the worse. We did not know it would be due to a virus, but we did know something would trigger a sell-off of some magnitude.
How did we know? Bull markets cannot go on forever. This last one went eleven years. We did not know when it would end. It could have been after nine, or even ten years, but it held on a bit longer.
The reason we stay invested for the long term is that timing market turns are impossible. Imagine a world without COVID-19, the Corona Virus. Where would the DOW Jones Industrial Average (DOW) be? We do not know either. That is why we stay invested, adjusting asset holdings occasionally when our model dictates. Flexibility is key.
We are confident in our long-term investment strategy. We know short-term volatility gets the headlines, but steady, strategic investing aims to be ahead of the race.
Our investment time horizon is three to five years. If you need money for expenses, retirement, etc. in the next few years, it should be in a conservative or low risk investment such as CD’s or money markets.
The DOW on April 1, 2015 was at 17,840. On April 1, 2016 it was at 17,773, a minor decrease year over year. April 1, 2017 found the DOW at 20,940. Where will the DOW be on April 1 this year? We do not know, but as I write this the DOW is reading 19,919.36 and rising—higher than three years ago, even after the huge sell-off we experienced this month.**
Looking at history, both viral and economic, we see the DOW moves higher once all of the fear and pain dissipate. This was true after the tech bubble of 1999, the attacks of 9/11, and the Great Recession of 2008. It was also true after the H1N1 and SARS infections.
We are confident the markets will likely return in due time. We cannot predict when that will be.
We do know the world will be different than before the virus. It exposed some shortcomings in our manufacturing, health care, and several other areas that will need to be addressed.
We at Thrive, as always, are taking this opportunity to assess what, if any, action we can take. What lessons can we learn? How can we improve our client communication?
If you are not a Thrive client and would like us to evaluate your current portfolio and financial plan, please give me a call. No cost, no obligation, no pressure.
Bill Withers, Lean on Me!
**Source: Yahoo Finance charts
Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Private Advisor Group (PAG), a registered investment advisor. PAG and Thrive Wealth Advisors are separate entities from LPL Financial.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.