Market Perspective: Don’t Let This Global Health Crisis Become a Personal Financial Crisis

Karen Schaeffer. CFP^® is the Managing Member and Co-founder of Schaeffer Financial LLC, a financial consulting firm in suburban Washington, D.C. She has been advising clients for over thirty-five years and has developed a diverse client base including professional women, Foreign Service Officers, foreign nationals and Federal government employees. She has been presenting seminars for the National Institute of Transition Planning, Inc. (NITP) for over 25 years.

Steer Clear of Panic Selling

Our best advice is to stop worrying. We know that this is easier said than done, but experience has taught us that now is the time to simply stay the course, especially when the market has been so volatile. Selling after a steep drop in price is called panic selling and is one of the most common and costly mistakes investors make. It realizes the loss that otherwise could have been recouped.

Remain Patient for Market Recovery

Patience, that elusive virtue, is our friend. In time, we know the market will recover. It is the uncertainty of when that recovery will happen that drives us crazy. Before you lose sleep wondering when the market will settle down, remember, in 1987, we didn’t know when the market would bounce back, we had no idea how long the dot com bubble burst would drag down the market in 2000, and we were unsure when the markets would recover after the worldwide collapse across stocks, bonds, and real estate in 2008. And yet, regardless of our sleepless nights, the market did recover — just as it will recover from the impact of this pandemic.

Truly, for many, no action is the best action. While we’re all practicing our patience it’s important to note that the markets, the economy, and the flattening of the virus curve are not all marching along in lock step. It took the U.S. economy years to recover after the 2008 crisis, but stocks were already heading higher as early as mid-2009.

Find Opportunities with Routine Investing

It’s also comforting to note that with every market downturn comes opportunity. In a bear market such as this, it is important to continue routine investing, if you’re able. While the bad news flooding our news sources and senses is real, don’t forget there will be some winners emerging. The companies that manufacture face masks, develop the vaccine, and make telecommuting easier come immediately to mind. Let’s not forget companies that carried very little debt going into this crisis. They have a built-in advantage now over their more leveraged competitors. And who knows what incredible innovation will be imagined and implemented as a result of our forced pause? There is good news ahead.

Be Proactive in Your Financial Planning

In the meantime, many Americans will feel a very real cash flow crunch in the coming months. For now, if your income is paused, it’s important to be proactive. Refinance expensive debt, look for side jobs, reduce expenses to essentials, and as a last resort, cut back on retirement contributions. If you are still fortunate enough to be it is very unlikely that you will exhaust your cash reserves. Nonetheless, it is possible that someone you care about will find themselves in that situation. Please help them to be proactive as well. Encourage them to contact creditors and ask for hardship concessions, particularly if there is a risk of missing a mortgage payment (a sample hardship letter is available here).

Other strategies include short term personal loans, community and government programs, and avoiding high interest credit card rates and payday loans.One last word of caution for all of us; scammers are out there preying on fear. Be careful what you click on and alert your more vulnerable loved ones. We must be more diligent than ever. We have no magic wand to wave away uncertainty. We don’t know when the story ends, but we do know the ending. We have survived pandemics and falling markets before and we will survive this crisis as well. Just as every storm runs out of rain, this too will pass.

To view the webinar on demand: (air date: July 15, 2020), click here.

Useful Resources

Here are some useful resource links that were mentioned during the webinar:

• Subscribe to CFP Board Newsletter
• National Foundation for Credit Counseling^® (NFCC^®)
• National Consumer Law Center, Inc.
• Bankrate’s Amortization Schedule Calculator