All of us at DecisionPoint understand that you and your families have many concerns at this time.
First, we know that you are personally on the front lines of combating this virus caused health crisis and rendering aid in our communities. Thank you for the personal sacrifices that you will be making!
Second, we know that the selloff in the global financial markets is causing extreme concern and anxiety as you see the value of your retirement and other investment accounts fall. We wish we could be in the fire houses, maintenance garages, and administrative offices talking with each of you today and calming your nerves.
There is no doubt that our Country is facing a unique challenge. All our lives are likely to be disrupted for many weeks and months to come until the spread of the virus is halted, or it runs its natural course. However, the history of the Spanish Flu (1918), Bird Flu (2003), SARS, and MARS should give us all hope that this crisis will have an end. History also teaches us that markets and economies always recover, and that the recoveries are often rapid.
Important Investment Advice for Each of Us
With financial markets falling another 7-8% as I write today, it is important that you do not succumb to fear and sell your equity positions at this time. To do such a thing would be to lock in 20-30% losses in your account. We promise that there will be a point that markets stabilize. At the first hint that the crisis is ending, markets are likely to rebound rapidly and unexpectedly, and you do not want to miss this.
Your 457(b) Contributions
Remember, as a participant in a 457(b) plan you are regularly contributing each month into your account. Those contributions are buying equities at very discounted prices today. When markets recover, you will benefit from having purchased equities in your accounts at these low prices.
Bonds vs. Stocks
Bonds have continued to rise in value during this stock market sell off. If you are close to retirement, the bonds in your portfolio are providing a hedge to the stock funds. However, we do not think that now is the time to buy bonds or go to cash. We think equities are presenting a potentially historic long-term value at these levels.
What is DecisionPoint Doing?
With market volatility comes tremendous opportunity. Remember that when investing, you always want to buy low and sell high. Not only have we been using this market decline to put cash to work by buying equities, but we are also preparing to rebalance your investment portfolios inside your 457(b) accounts. Rebalancing means selling what has been doing well (i.e., bonds) and buying what has been doing the worst. Rebalancing now will benefit our clients when markets recover.
As we stated earlier this week, the U.S. economy was likely running at a very strong 3.0% GDP growth rate at the end of February when the crisis really began in America. We were also at close to full employment with just 3.5% unemployed.
Today, the Federal reserve is pulling out all the stops to flood the banking system with liquidity and reduce interest rates. Congress is also likely to enact various forms of targeted fiscal stimulus to help those Americans and industries most impacted by the virus. While such measures will not help defeat the virus, it will provide an extremely firm economic footing for the U.S. economy to recover rapidly when the health crisis has passed.
Again, mortgage rates have plummeted. Make sure you are speaking with your mortgage lender to see if refinancing makes sense.
As always, please reach out if we can be of assistance!
- Your DecisionPoint Financial Planning Team -