We have our first surprise of the year, the Coronavirus, in a largely negative way today. This negative impact is likely the first of several unexpected, unpredicted events we will experience in 2020.
It’s a good time to take a step back and identify what we know, what we don’t know what we can control, and what we can’t control. Those types of thinking exercises can help us make good decisions.
The Coronavirus is still in its infancy. We don’t know how much it will spread nor the economic toll it can take. It could be over in a few days with little economic impact, or it could go on for some time and affect global economies. We have had similar health scares in the past 20 years: SARS, Avian Flu, Swine Flu, and Ebola. All of those elicited similar panics in the media and temporary economic impact. As far as the stock market goes, it has increased substantially in the past 20 years despite not one, but several global health scares.
If the flu worsens, it may cause a reduction in corporate earnings possibly causing the stock market to sell-off. But, if it is anything like the past, it would be temporary. Therefore, if the market sells off, we should be looking at good entry points to buy high-quality stocks on sale. Economic and stock market crises may be scary at the moment, but they provide lower prices for investors that want to “buy low.”
Turn on any media today, and Coronavirus dominates the headlines. What if Coronavirus wasn’t happening, and there was not impeachment last month? What would the news media be reporting? And what happens when Coronavirus runs its course like impeachment? What will the media talk about then? I don’t know – except, I know they will find something and make it seem like a very big deal.
We can’t control the news. We can’t control how other investors behave. But we are in complete control of what we choose to pay attention to and how we choose to respond. We need to choose our responses based on our risk tolerance and time horizon.
Fiduciary Planning LLC (“Fiduciary Planning”) is an SEC-registered investment advisory firm. This page is for informational purposes only and does not constitute, and is not to be construed as, an offer, solicitation, or recommendation to buy or sell any securities or related advisory services.