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U.S. Equity Returns Following Past Downturns

 

US Equity Returns Following Past Downturns

Today is the third week of the 2020 market correction and I wanted to give you my perspective of the Coronavirus (Covid-19) and the Stock Market.

 My view is that supply chains and the economy will return to normal eventually, in spite of the uncertainty regarding the scope and length of the Coronavirus outbreak. World monetary funds have reduced interest rates, 10-year government bonds pay less than 1% today, while the yield on the S&P 500 is averaging 2%.

 I believe the best thing we can do with your portfolio is to maintain your target allocation and rebalance annually or more often when we deviate from your target. First, this is normal. A stock market correction has happened every two years since 1950. Second, timing the market is futile: The best and worst trading days usually happen close together. The following is a chart showing the one, two and five year returns after prior crises.

 

The following is a link to US Equity Returns Following Past Downturns since 1926, summarized by Nobel Prize winners Eugene Fama and Kenneth French.

 

Please feel free to schedule a call at my website www.primewealth.com, if you feel you want to discuss this further or reevaluate the appropriateness of your portfolio.

 

Thank you!