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  • Writer's pictureHarry N. Stout

79- The Best Laid Plans

Updated: Jan 15, 2021

Written by: Paul Werlin, President, Human Capital Resources, Inc.

Never has the stock market fallen so far, so fast. The coronavirus, COVID 19, is not only a world-wide health crisis but will undoubtedly hurt economic growth all over the world. Airlines have cancelled thousands of flights, theme parks closed, professional sports seasons and events have been cancelled, and entire countries are now in “lock-down.”In fact, it looks to be a pretty good bet that the US economy will enter some kind of a recession. How long it may last and how bad it could become are still uncertain.

In order to help the economy, the Federal Reserve has already lowered interest rates, and US Treasury securities are yielding unprecedented low rates of return. And it’s still possible that, like some European countries, US Treasuries could provide a negative rate of return — that means you will get less than your initial principal at maturity! This may be good news for borrowers — businesses and corporations, as well as a good time to refinance a mortgage. But for savers and investors, it makes for historically low returns on bonds and related fixed income products like annuities and CDs. And of course, if the US does enter a recession, it’s certainly possible corporate defaults and bankruptcies could spike.

So, the question every investor must ask themselves it what to do NOW? As in any crisis, rule number one is always — don’t panic! It’s pretty well established that the professionals, let alone the average investor, can never pick the tops or the bottoms of markets. It’s just not possible to pick the absolute best time to buy or sell. In fact, it’s pretty common for many investors to panic, sell at the lows, and miss rebounds when they do occur.

Markets will occasionally experience dramatic drops — the real estate bubble, 911, the dot com crash, just to name a few. These so-called “black swan events," or events that are a complete surprise and have significant impacts, have hit markets since markets existed. But the fact is, long-term investing has a very good track record. During the 87-year period from 1928 to 2015, the S&P 500 returned an average of 9.5% per year. That’s pretty darn good. And over any 20-year period, the S&P 500 has always posted a positive return, no matter when you invested. Investors need to always remember that stocks need to be thought of as long-term investments. Buy stocks (or other securities) for short term gains can be risky and uncertain.

There’s no doubt the current crisis will pass. Business and government will go back to “normal.”Time and again, it’s been proven that having a plan and sticking to it is best course of action. And, if you have the funds, there certainly will be some great investment opportunities to be had.


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