Upon reflection of the financial crisis that caused the Great Recession in 2008-09, most analysts agree that both Congress and the Federal Reserve acted too slowly and too timidly to effectively ease the economic pain. In fact, most believe their inaction caused the recession to be deeper and more prolonged than if they’d acted more decisively.
During March the financial markets – both stocks and bonds – have behaved like I felt: tired, panicked and emotional. Let’s face it, those among us who haven’t felt those emotions are delusional or are actually robots. Working from home, figuring out Zoom, watching baseball games from 1976 rather than the NCAA tournament, wondering if every spring allergy sneeze is actually…IT! It’s quite natural to feel stressed and that makes us tired, which can lead to poor decision making. The stock and bond markets have been panicking – don’t fall for the trap.
Several clients of mine called, texted or emailed last week to ask - wait for it - how I was holding up with the stock market volatility! How I was doing! I get slightly choked up just thinking about it. Yes, the stock market has been crazy the past few weeks, to use a highly technical term. But, as those calls of concern show, a crisis often brings out the best of people.
I bumped into a neighbor at Starbucks last Saturday who quickly asked me if I thought he should move money within his IRA from bonds to stocks to take advantage of the stock sell-off that week. You know, buy low-hopefully sell high. Now, I don’t know this guy very well – I don’t even know his last name – so it’s impossible to provide him with personalized advice. So, I responded with a question: If you buy stocks now and the market drops another 20% over the next few months, will you still view your purchase as a wise one?
The Market In Perspective
There was a headline last week regarding the stock market’s drop titled, “How to Steer Your 401(k) Through Choppy Markets.” It seems to us a better title might be, “Your Portfolio Is Charting the Right Course, Hold Steady Through a Few Bumps.”
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