COVID-19 Update: Time to Sell or Buying Opportunity?

We have been receiving a lot of calls from clients wondering if we have a plan to deal with the current market environment.

One of the difficulties of sending out these missives is how to write something that addresses the varying concerns of our broad client base. Some folks are fearful of the recent market action, and are wondering if now is the time to “get out”? Other folks are looking for opportunity, and asking us if this is a buying opportunity. So today we will try to address these two disparate concerns separately—

Should I sell? – Extreme market volatility is always disconcerting. We get it, and never want to minimize the discomfort associated with seeing declines in your portfolios. But there is an adage that ‘no one ever made a dime panicking’. If you sold every time the market had a large correction, your long-term returns would be horrible. A better plan is to be patient and use the big up days that always surface to your advantage, and reposition at that time. That is our game plan. We are planning to use any market rallies in the near-future to reduce equity exposure and get more defensive in client accounts. We know from decades of experience that this is the most prudent plan of action.

Is this a buying opportunity? – When we look back on this episode of market panic, it will most likely look like a buying opportunity. But we want to be careful about the timing. The market is currently trying to make a short-term bottom in the S&P 500 around levels between 2710-2740. If that holds, and there is any hint of positive news developments, the market should enjoy some sort of relief rally. But history also shows that after said relief rally, the stock market often comes back down to “retest” the initial lows. If the prior lows hold, then we would look at that as a better time to add to stocks. Until then, we would advise clients to just be patient. Corrections take time.

We hope you find this helpful. If you have specific questions, please contact your advisor.

Jordan L. Kahn, CFA
Chief Investment Officer

*This article is provided for informational purposes only and should not be interpreted as investment advice.