Coronavirus Stock Market Correction – What to do? | AP Wealth Management

Coronavirus Stock Market Correction

A stock market correction is usually defined as a drop in stock prices of 10 percent or greater from the most recent peak. Since World War II, we have seen twenty-six S&P 500 corrections (drops of 10% or more).  The average drop has been 14% and the recovery normally takes 4.5 months on average.  The most recent peak was on February 19th.  Since that date, concerns over the Coronavirus have caused the stock market to experience a correction. So, what should you do?

  1. Ride It Out – Behavior finance studies consistently find that resisting the urge to “sell” in down markets is the key to achieving long-term growth.  You do not want to lock in losses by selling and putting money in cash right now.
  1. Review Asset Allocation – Your AP Wealth team is always monitoring your asset allocation. We can control the magnitude of the positive or negative returns by selecting a conservative or aggressive mix of investments.  We view market corrections as an opportunity to consider rebalancing.  Stocks go on “sale” during corrections, so this is often the best time to “buy” stocks. Recently, AP Wealth has been building cash positions in anticipation of a correction.  This will be a great opportunity for us to deploy that cash.
  1. Invest Excess Cash – If you have cash you will not use in the next 36 months, corrections are a great opportunity to invest that cash.
  1. Refinance Debt – Interest rates are at historic lows.  This is a great time to consider refinancing loans.  Our AP Wealth team would be happy to help you discuss what options you should consider given the low interest rates.
  1. Roth Conversions – If you are planning to do a Roth conversion in 2020, consider doing it now during the market correction. Our AP Wealth team would be happy to help you discuss if a Roth conversion is right for you.

This recent correction has been very fast paced.  No one has a crystal ball, so no one knows if this correction will have a prolonged decline or a fast recovery. Market pricing is a function of future earnings. The Coronavirus has caused uncertainty for future earnings of companies around the world.  Over the next few weeks and months, the actual impact of the virus on our economies and business will be better understood.  As that happens, the market prices will start to adjust and recover.

As you consider different courses of action during this correction and the upcoming recovery, we encourage you to call us if you have any questions at (706) 364 – 4281.

This blog and the information posted through this forum is for informational purposes only and should not be construed as investment advice or an endorsement of a specific security or other investment.  Any action taken based upon the information herein is at the risk of the reader. AP Wealth Management will not be liable for any losses, damages, or negative consequences due to a decision the reader takes after reading/viewing our content.