Mar 04, 2020

Market Update: Uncertainty, Fear Drive Volatility

By Kara Murphy, CFA® Chief Investment Officer

The continued spread of coronavirus has swiftly driven the equity markets into negative territory for the year. Heightened fear and uncertainty surrounding the outbreak have also pulled Treasury yields to all-time lows, and prompted several high-profile companies to cut their near-term earnings outlook. This type of volatility can understandably cause some concern about investment portfolios.

But it’s important to keep in mind that we’ve seen similar selloffs before. In these instances, there seemed to be no end in sight, but the market and global economy proved resilient over the long term.

That said, we are closely following current developments in order to identify how the new coronavirus outbreak might impact markets. During times of heightened uncertainty, history can be a useful guide. In examining past epidemics, we find that Treasurys, a safe-haven asset, have tended to outperform equities in the initial stages of an outbreak. And, in fact, this week Treasury yields (which move inversely to prices) touched new lows. But the underperformance of stocks surrounding past epidemics has proved temporary, lasting roughly three to four months.

Uncertainty drives market volatility, but it also increases the risk of investors making rash, fear-based decisions. It’s important to stay focused on your long-term plan, despite the daily drumbeat of troubling headlines. A United Capital financial advisor can help you put market volatility in context and assist with positioning your portfolio to align with your long-term financial goals.

Kara Murphy

Kara Murphy, CFA® Chief Investment Officer

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