As you probably know, this week has certainly been a wild one in the stock market. The rising concerns of the global economic impact of the spreading coronavirus has sent a shock to the market. The threat of this virus is real, and we are starting to see some economic impacts. However, there is plenty that is still unknown, and one thing the markets don’t like is uncertainty. At this point we can only guess at the duration and magnitude of the virus’s impact. If the spread of virus is stabilized, we will be looking at a swift recovery with little economic stimulus needed. Conversely, there may be a need for the Fed to lower rates and use monetary policy to help boost the economy over the next few months in the wake of the virus.
Regardless, the overall economy started the year strong and it will remain strong once the virus is contained. We are still confident that the impact of the virus will be short-term.
Most importantly, we have to focus on the fact that WE PLANNED FOR THIS. When we sat down with our clients and built their investment allocation, we used our Secure Lifetime Investment Model (SLIM™). Using SLIM means that we are only using stock market investments (buckets 3,4,5) for long term goals - at least 10 years from now. Anything else is positioned out of the stock market - cash in bucket 1 and a non-stock portfolio in bucket 2. The FFG On Deck Portfolio (in bucket 2) has been very stable this week and is very well positioned to weather this storm.
Our portfolio management will remain consistent. Our stock portfolios will remain in stocks and non-stock portfolios will remain out of the stock market. We are not market timers and will not make long term investment decisions based on daily price movements in the market. The uncertainty and volatility day-to-day is too great. However, the coronavirus will present opportunities that we can take advantage of. Certain sectors and areas of the market will be under priced and we will be ready to ride those stocks up during the inevitable rebound. That will likely play out over the upcoming months, not days, though.