Putting Market Volatility Into Perspective

Over the past few weeks, the growing concern of the coronavirus (COVID-19) has all of our attention. As this situation continues to have an increased impact on financial markets and communities, I want to connect with you directly to help make sense of what is surely an emotional time for families and an anxious time for investors. Please know that I am here for you during this challenging and stressful time.

Putting things into perspective

Negative market response to health crises is not new. In fact, since 2003 there have been several different epidemics that caused short-term disruption and panic in the financial markets. The good news is that in nearly every case they were relatively short-lived, and as you can see from the chart below, the S&P 500 experienced sizable gains over the months immediately following the downturns. While there is no guarantee the market will rebound in this current situation, historically negative market responses to these types of healthcare crises have been temporary dips.

Historical view of market performance during epidemics*

*Source: Dow Jones Market Data, as cited on foxbusiness.com, January 27, 2020. Stocks are represented by the Standard & Poor's 500 price index. Returns reflect the change in price, but not the reinvestment of dividends. The S&P 500 is an unmanaged index that is generally considered to be representative of the U.S. stock market. Returns shown do not reflect taxes, fees, brokerage commissions, or other expenses typically associated with investing. The performance of an unmanaged index is not indicative of the performance of any particular investment. Individuals cannot invest directly in any index. Actual results will vary. Past performance does not indicate future results.

*End of month during which early incidents of outbreak were reported.

**H1N1 occurred during the financial crisis, when, as during other periods, many different factors influenced by market performance.

Strategies that can help you stay calm through the storm

Market volatility can be unsettling and increase anxiety. While no one can predict what the market will do and when, making decisions based on panic rarely plays out well in the long term. In these challenging times, we must find a balance in the way we live and invest to take advantage of the inevitable progress of science and in financial markets while managing the probability of short-term disruptions. That’s why it’s important to focus on your long-term goals as well as asset allocation and rebalancing based on goals, time frame, and risk tolerance. To learn more about staying calm in rough markets, read this"Shook up by Market Volatility" Voya article.

History and time have shown that volatility often has an upside, especially when you use strategies like dollar-cost averaging. When you dollar-cost average, you invest equal dollar amounts at regular intervals of time – for example, investing $100 in your workplace retirement savings plan at the same time each month. Rather than trying to time the market’s ups and downs, you buy at range of difference prices. To learn more, read this “Navigating Market Volatility” Voya article. Keep in mind that dollar cost averaging does not ensure a profit nor guarantee against loss. Investors should consider their financial ability to continue their purchases through periods of low price levels.

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