All signs are pointing to more tough weeks for investors: Coronavirus cases are up, lockdowns and shelter-in-place mandates are increasing, the Dow Jones and S&P 500 continue to fall, and experts are forecasting dramatic plunges in the U.S. GDP for coming quarters.
It’s all part of what we are calling the “social distancing recession,” and you may be wondering what this all means for you.
We recently held a webinar for Ironwood Wealth Management clients to discuss the current state of the economy and to answer investor questions. Here are our top takeaways.
Investors are spooked.
The speed at which we’ve seen the markets drop isn’t what’s unprecedented; it’s the fact that the precipitous drop (30% at the time of the webinar) occurred over just 16 days of trading. Bonds and stocks also went down at the same time, which means high frequency traders are trying to free up cash by de-risking their portfolios as quickly as possible.
It’s uncertain how the economy will be affected.
Early estimates are all over the board, and we believe it’s a bit of a fool’s game to try to predict what will happen with the economy. What we do know is that the bull market is over, and we will firmly be in a recession for the next couple of quarters. Headlines are likely to get worse from an economic standpoint.
Look to 2021.
In 2021, we believe we will see a major uptick in GDP growth and in earnings growth. We’re not certain that the stock market will stay at the current levels for long, and believe the market will start looking at 2021 earnings. We see a lot of opportunities for long-term investors, and believe it’s important to separate the economy from the stock market.
The time to rebalance is now.
This is the time to make sure we’re doing rebalances and selling our safe assets that have held up during this period, and buying aggressive assets. Small cap in general has been having a rough go, while some of the emerging markets have actually been holding up a bit better (generally speaking).
Look at price, not timing.
You can’t time the bottom. We are advising our clients to dollar-cost average over a month or two to take advantage of the lows. Prices at these levels look very attractive, especially if we take a step back and look at prices in small cap, international and emerging markets. The valuations that we see look very compelling at these levels.
Consult with your wealth advisor.
As far as your individual investor circumstances go, be sure to reach out to your wealth manager or financial advisor to determine what the right course of action is for you at this time. The wealth advisors at Ironwood Wealth Management are working hard and are here for you during these turbulent times.
Want more? Watch our complete webinar, and get in touch if you’d like to find out more about how Ironwood Wealth Management can help you at this time.