| First of all, I hope you and your loved ones are healthy and safe during this time. These are historic, unprecedented times and it is important to be thinking clearly at times when stress levels are high. The stock market has been making wild swings and it can create anxiety and fear, especially if you don’t know what to do. It helps to under- stand why the volatility has been happening. Let me explain it succinctly. The stock market has been declining in 4 Phases: 1) Phase One was from the threat of supply chain disruption – when Wuhan citizens got the virus, companies here didn’t know if they wouldn’t be able to get parts to continue to manufacture products or if they would have supplies to sell. 2) Phase Two was from the oil war between the oil producing countries (OPEC) and Russia. They are dropping the price of oil in order to drop the price of oil below what it costs US shale oil producers to produce unconventional oil from shale. 3) Phase Three was states, cities, concerts, sporting events, travel and large groups being shut down. Everyone was advised to socially distance themselves and stay home. 4) Phase Four on Wednesday was another leg down in oil prices, as oil reached an 18 year low. Rather than try to determine the absolute bottom, it is important to look for key indicators that have shown us we are close to bottoms in the past: 1) The Volatility Index (VIX) has been at record highs, higher than at the bottom of the 2008 financial crisis. This is a good contrarian indicator. 2) Capitulation – when investors give up and throw in the towel. A friend who manages money said her clients were capitulating and selling stocks on Wednesday. 3) Volume – the number of shares traded can be at a high.No one likes to see the stock market drop. It’s a lot more fun to see new highs each day. Here’s what we know: 1) This was not caused by a financial problem. It is a health crisis that is causing a financial crisis. The underlying economy was healthy. 2) Increased buying of supplies, medicine and food by consumers is offsetting the decline in travel, according to Treasury Secy. Mnuchin. 3) Congress is working on three aid packages to get us to the other side of this.We are on day 12 of a 15 day countdown by the White House Task Force. If the outbreaks decline on the chart to a “hill” (instead of the feared “mountain” chart), we could be back to normal very quickly. That would be a best case scenario. What can you do? In order to have the best financial outcome I recommend: 1) You do not sell any stocks in your portfolio. That will lock in losses and preclude you from participating in the inevitable bounce higher that is coming. 2) You keep enough cash on hand for groceries for a few weeks to a month and so you feel safe. 3) Realize the market is attempting to bottom. It may be behind us or we may have some more selling ahead, but we are in a bottoming process.4) If you have money to invest for 3 to 5 years, realize this could be the best buying opportunity in over a decade. Today, one of the best portfolio managers on Wall Street, said this:“In my lifetime there have been 4 incredible buying opportunities for stocks: 1974, 1982, 1987, 2008-2009 and this is the fifth one…This is the buying opportunity of a lifetime.” – Bill Miller This too shall pass. We will get to the other side of this. When we do, I think you will see the stock market make an astonishing bounce UP. From the lows in 2009 to the peak of this market was a 500% gain.You have a choice how you react that will determine a lot about your financial future: 1. You can panic and sell (please don’t, that will lock in losses). 2. You can do nothing and wait it out (decent strategy to get back to where you were). 3. You can take advantage of buying low, getting educated about how to invest better, and have guidance along the way so you can gain, maybe even a lot, from this (best idea). It’s up to you. Linda P. Jones America’s Wealth Mentor See my wealth mentoring library at https://lindapjones.com/podcasts |
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