As we mentioned in our last couple of posts, the markets are certainly either acting, reacting or over-reacting based on your own personal perspective.
First, let’s look at the overall market performance for the past month. Based on the chart below, we can see the significant changes in pricing over a very short period of time – truly volatile changes.
Based on the two charts below, we can see the net effect of the overall market volatility on market pricing levels (enhanced by the Dow Jones price weighted model) is a negative impact of 6000+ points. We started the market at 29,232 points on Feb 18 and completed the week of Mar 13 at 23,185 – a net loss of 6,047 points or a 20.6% drop.
So why did the stock markets fall so dramatically in the past month?
Based on the information online, a lot of this decline has to do with the current Corona virus situation – a lot of risk surrounding the mandatory quarantine efforts on countries like Italy, Spain and possibly others to be more in the future. All of this is leading to uncertainty within the global environment.
As expected, certain industries have seen immediate impact on their stock price – Severely affected industries are airlines, cruise lines, tourism and potentially overflow into supply chain, manufacturing (cars, heavy industry) and more.
So now that we know that the market is exceptionally volatile for the past few weeks, what do we do? As we mentioned in our previous posting, we have three courses of action to take:
How to Respond – 3 Courses of Action to Take:
- Option 1 – “Sell Everything – Panic”
- Option 2 – “Hold Fast – Do Nothing”
- Option 3 – “Buy More – Toughest Trekking”
- Click Here for More Details from our original post.
Overall, it’s best not to panic and lock your investments at a downward period; nearly a 20% loss from 2019 highs – Despite the rush of panic inducing headlines and media hype surrounding the current virus situation. Moreover, as we are all typically motivated to action during times of external crisis to do something, it’s probably best to sit tight financially and not make any sudden moves to sell or liquidate your investment assets. Additionally, if you have extra courage, you can use these market dips as a buying experience – Using dollar cost averaging to lower your investment cost basis.
Best Option – Ignore the markets; Focus on Helping others
However, if we take this crisis into context, what is happening on the markets is just a small part of the overall impact of the virus. If we look at the bigger picture, the economy will rebound (today, next week, next month or next year) but in the meantime we must do our part to help the situation overall.
Therefore, it’s best to limit our activities that support the spread of the virus and help flatten the curve surrounding infection rates (see below) – this will provide our healthcare system (CAD, US, EUR, WORLD) with available capacity to do what is needed to help those truly sick. founds
Additionally, if you have spare funds available, consider supporting the efforts of the red cross in tackling the spread of the virus.
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