2020 Market Selloff

Gary Meagher |

It goes without saying that these are trying times.  With the Novel Coronavirus spreading throughout the world and too many feeling the effects of Covid-19, the challenges are many.    Like you, I am hoping for a quick resolution to the medical issues, and am following the guidelines set up to contain or at least slow the spread of the infections.

Up until now we have been working from our offices.  I suspect that will continue, but we have contingencies in place that will give us the opportunity to work from our homes, if necessary or advisable.   Telephone calls that come into our office can be forwarded to us, and access to our calendars and files can be securely accessed from outside the office.

That being said, the purpose of this letter is to comment on the current market conditions and to let you know how I think we should proceed going forward.

In January the US Government weighed the economic and human costs of this rapidly spreading virus and determined to focus on stopping the spread of the disease, regardless of the near-term economic hit.  Various state and local governments have followed suit and have limited avenues of activity, which by their nature have economic consequences.  In addition, the general public has curtailed a lot of activity by choice.   Even without government’s encouragement unnecessary travel was reduced significantly, as well as attendance at theatrical and musical performances along with sporting events.

The big question is, “how long will this last?”  Unfortunately, at this point, no one really has an answer.  Once the medical issue is resolved the economy will have the opportunity to regain its footing.  After which, the markets should respond.  If history is a guide a market recovery could then be relatively soon or take some time.

I have enclosed two charts prepared by Morningstar®.  One shows the previous stock market contractions and expansions from 1973 through 2019.  The second chart shows the market downturns and recoveries from 1926 through 2019.

The Stock Market Contractions and Expansions chart puts these changes in the stock market into some historical context.  The Market Downturns and Recoveries chart shows the time and severity of stock market declines from 1926 through the end of 2019.  The worst, of course, was the Great Depression in which the market declined for 34 months and then needed 151 months to get back to even.  Others were less impactful.   As you can see, the 16 months decline in 2007-2009 took 37 months to get back to even, and the 29.6% decline in 1987 took 18 months to recover.

The one thing that both of these charts demonstrate is that eventually stock values returned to their previous levels and moved up from there.

We are monitoring the situation and your accounts.  As of now, I think that we should stay invested as we are.  I do not see any specific activity that would improve our long-term outcome.

It is my sincere hope that the health and medical issues surrounding the coronavirus are resolved soon both here and abroad.  And that people around the world can return to their normal lives and activities.

Do not hesitate to call if you would like to discuss this or other issues.  If you prefer to schedule a facetime session, we can do that as well.

Stay safe and be well! 


Gary L. Meagher, CFP®

LPL Registered Principal