Mar 11, 2020

Maintaining Perspective in Uncertain Times

Mar 11, 2020
Mark T. Johnsen
Chief Wealth Architect, CEO & Founder
“History does not repeat itself, but it often rhymes.” – Often Attributed to Mark Twain

Eleven years ago Monday, March 9th, 2009, marked the bottom of the bear market of the great financial crisis of 2007-09. I was struck by the irony that eleven years to the day we found ourselves in the midst of another global panic. But this time the fear feels different. Right now, we not only perceive a threat to our financial security, but also to our fundamental health and well-being.

It’s important to recognize that each time we experience a new and uncertain event that threatens one of our most basic human needs – like safety and security – it always feels different. Uncertainty often breeds fear. As human beings, we crave the comfort of certainty and, when we can’t find it, it impacts our peace of mind and well-being.

A health scare like the current COVID-19 outbreak is a negative multiplier that impacts all facets of our wellness (physical, financial, social, career and community). The current impact is personal on all levels. With the possibility of the virus finding its way into the places we live and work, we are forced to consider the safety of not only ourselves and those immediately around us, but our entire community. We’re seeing now how this health scare could impact the global economy, our jobs and personal finances. We have a natural response to seek safety and security in the short-term; the instinctual ‘fight or flight’ response.

Sometimes these immediate responses can be beneficial to certain facets of our well-being like staying physically well by washing our hands more frequently or avoiding unnecessary risks like crowded places. However, short-term responses to things like our investments can negatively impact aspects of our long-term financial wellness in ways we may not fully realize until it’s too late. At Wealth Architects, we view it as our job to help you separate the rational and emotional decisions to make the right choices to enhance and maintain your overall well-being.

The financial markets have reacted strongly and swiftly to the fact that there is much uncertainty regarding this new virus. We simply don’t know where, when, or how this global virus will play out – and the one thing that markets fear most in this world is uncertainty.

The U.S. stock market (S&P 500) as of today’s close is down more than 19% from its all-time high, recorded on February 19th, 2020. Almost to bear market territory, declines of this magnitude are fairly common occurrences – markets go down 10% or more on average once per year and 20% or more once every six years. But such a decline in one month’s time is noteworthy, not just for its depth, but for its suddenness. When it feels like we’re in a free fall, the automatic response is to hold on to something... anything. The first place we often look is to our money.

In my almost 30 years working in this volatile industry, experiencing distressing and unexpected events like the Persian Gulf War, 9-11 and the Great Recession, I have realized one essential truth: we have absolutely no control over the uncertainty and outcomes of these types of events but we do have absolute control over how we plan for and respond to them. Minding this one essential truth is critical to preserving both our peace of mind and financial well-being.

At Wealth Architects, we don’t have a crystal ball – no one does. We don’t know whether things will get worse before they get better or how long these difficult times will last, but we do know that we plan for these types of events even if we cannot name them in advance. Our core focus is to develop your financial plans, properly diversify your investments and stay disciplined to allow you to ride out and embrace an uncertain world. If history can be referenced for perspective (please see the graphic below from Avantis Investors’™ article Coronavirus, Pandemics and the World Economy1) – this too shall eventually pass thanks to the ingenuity and compassion of our fellow humans.

I hope that no matter how traumatic this turns out to be, it serves to bring us together not only as a nation, but as a global community - because we are all in this together.

As always, we are here to help you and your loved ones to determine the best course of action to ensure you meet your financial-life goals. Through the rise and fall of life’s many challenges, we continue to believe that optimism is the only realism. We wish you and your families well.

All my best,
MTJ

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1 Avantis Investors. (2020, February). Coronaviruses, Pandemics and the World Economy. Avantis Investors. https://owl.purdue.edu/owl/research_and_citation/apa_style/apa_formatting_and_style_guide/reference_list_electronic_sources.html