By David K. Little, CFP®, CFA

After a volatile but overall slightly positive week for the markets last week, we’ve seen more large declines this week. The coronavirus seems to be the cause, although the oil price war between Saudi Arabia and Russia can also take some of the blame. While we don’t know exactly what’s going to happen or when, I thought it might be helpful to let you know some of our thoughts on the situation.

We’re here to help people calm their fears. Listening to the media 24/7 and hearing screaming headlines is scary, but selling into a panic will almost certainly turn out to be a mistake. It’s natural to want to stop the pain in the short run by selling stocks, but we don’t think that’s what investing for the long run is about.

This may sound flippant, but the end of the world only comes once, and we will not manage portfolios to that. We’ve seen markets dip like this before, and in all cases, they’ve come back. There have been viruses and sicknesses before, and those problems have always passed.

Nobody predicted this decline. Up until just a couple weeks ago, the market was shrugging off fears about the virus and the economy was humming along nicely. There are always market pundits out there calling for corrections and bear markets, but many of them have spent years doing that and have missed very large gains over the last decade. Knowing when to get out of the market, and importantly, knowing when to get back in, is not consistently possible, in our opinion.

On a similar note, we don’t think the strategy of getting out of the market and then getting back in once it’s stabilized is viable. The last bear market is a valuable reminder of that. For reasons no one really understands (I think I remember Citibank announcing some good news that month, but who knows if that was really the catalyst), the market bottomed out in March of 2009 and almost immediately began a rapid rise. Less than three months later, it had bounced more than 40% from where it traded at its lows. Many investors who had sold out were still waiting for stabilization, even after that gain.

It’s been said that nobody will ring the all-clear bell to tell us when the market is about to go back up, so our strategy will be to continue to ride through this decline and wait for the rebound, which will come eventually. Unfortunately, this is a good reminder that risk indeed goes hand-in-hand with the long-term rewards of investing in the stock market.

Please give us a call or send a note if you’d like to discuss your situation in more detail with us. You may hear us simply repeat some of the things we’ve said in this note, but we’re more than happy to talk to you, even though we freely admit we don’t have all the answers. All the employees at Eclectic Associates invest in the same things our clients own, so we understand the thoughts you’re having, and we’re going through this with you.

And on that note, I’d like to let you know that we have systems in place that will allow us at Eclectic to continue to operate, even if the situation worsens. We’ve invested in computer systems that allow us to remotely access our systems at the office, and our interactions with the companies that hold your money primarily take place over the Internet, which means we can function from anywhere we have internet access. We don’t think we’ll get to a point where we’ll need to fall back on this, but we want you to know that we can if the need does arise.