This week, I’m talking about how to keep calm in a bear market.

Today, I want to share with you an email I sent to clients on March 10th, a day after the 11 year anniversary of the start of the bull market, and 2 days before the biggest one-day drop since Black Monday in 1987. The email summarizes my view on this pandemic and it’s impact on the economy and stock market, and my goal with this email was to encourage clients to stay the course and not let fear and panic drive their investment decisions, so I hope it’s helpful for you as well: 

“Dear Clients:

With the current stock market reacting so strongly to the Coronavirus, I’ve been trying to reach out to many of our clients over the last couple weeks, but its challenging to get in touch with everyone, so I wanted to provide you an update via email. If you’re especially nervous, please let me know and I will be sure to give you a call within the next week so we can talk one-on-one.

Now that the S&P 500 and other major averages are down nearly 20%, we’re very close to this current downturn turning into a full-blown bear market (which is defined as a drop of 20% or more from the top). This current correction, brought on by fears of lasting global economic damage from the Coronavirus, is the seventh one since March 2009, so it’s not unusual or even surprising that this is happening.

What is unusual are the wild swings in the stock market since this Coronavirus correction started. According to Bespoke Investment Group, the incredibly wild swings we’ve seen in the stock market recently have only occurred a few other times since the S&P 500’s inception in 1928. Aside from the multiple occurrences during the Great Depression era and a brief period around the Crash of ’87, it’s since only happened in late 2008 during the depths of the Great Recession/Financial Crisis and again in August 2011 when U.S. debt was downgraded.

It remains to be seen whether this current downturn will be temporary or the beginning of the next recession and bear market, and because there are still so many unknowns, the stock market has been reacting very manic-depressive to the daily news cycle.

Liz Ann Sonders, Chief Investment Strategist at Charles Schwab said today: “Economists don’t quite know what to do with gross domestic product forecasts, and analysts and strategists don’t know quite what to do with earnings estimates.” The good news is that the economy was on a solid foundation heading into the current Coronavirus crisis, so the lasting impact of the current downturn depends on how quickly the pandemic can be contained. 

Our advice during this current volatility is still the same. For most of our clients, the best advice we can give you is to do nothing. The likelihood is that your asset allocation (i.e. your stock and bond mix) is aligned for your age, and your investment portfolio is positioned to handle a downturn.

But what if the economy sours and the stock market continues its decline? We have been through this before and we do not intend to sit on the sidelines. For many of our clients, that means we plan to take advantage of the downturn to “buy low” and add to stocks. This strategy takes courage, but it’s worked exceptionally well in previous recessions and bear markets.

So for now, we are in a wait-and-see mode. Above all, we want you to remember that panic-selling is not an investment strategy. Patience is usually rewarded, and this time around is unlikely to be any different.”

That’s it for today. Thanks for listening. My name is Ashley Micciche and this is the One Minute Retirement Tip. 

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