Tranel Talks Column

Coronavirus & The Financial Market

The market has been under significant pressure for the last couple of weeks as a result of the Coronavirus outbreak. Some investors are fearful that the market will continue to decline while others are skeptical the virus will have any more of an impact.

To help you understand the affect of the Coronavirus and how it has influenced the financial market, Tyler Braun, Financial Advisor with The Tranel Financial Group, has put together a quick video that details what’s already unfolded and what you should consider as the virus continues to spread.

Video Transcription:

Hi, this is Tyler Braun with the Tranel Financial Group. This week has been extremely volatile and we’ve seen the market all over the place, and ultimately it’s being driven by the Coronavirus. We hear that in the news all the time and people say, “Well, how is the virus linked to the market.”

The Virus Is Slowing Down Manufacturers & Global Trade

Really it’s the trickle-down effect. If the virus is causing people to miss work, causing cities or nations to quarantine individuals where they are not able to get to their jobs, manufacturing or allow imports or exports. What that does is it starts to slow production because there is not the global trade happening. And even internally if you are making a product or a manufacturing company for example, you’re not able to have the employees there and you’re not able to manufacture the products.

As the virus has spread outside of Wuhan, China and then outside of China itself and into more developed nations such as South Korea, Japan, and threats of the United States we’ve seen that there is a bigger fear for an economic restriction. Meaning these plants are not going to be able to hit their production numbers. They are not going to be able to import and export the things that I just talked about.

Now, the unknown is the biggest fear for these corporations. Remember that a corporation’s job is to show profits to their shareholders, so as they are going through this moment of “we don’t know what is going to happen” just like you and I, that causes some fears and anxiety and when you see that it triggers people to let their emotions come through and say well sell. This creates a snowball effect and that’s where we’re starting to see this knee jerk reaction take place.

Stay Calm & Let Cool Heads Prevail

A lot of the generated selling we’ve seen the last few days have been just retail investors going into the 401k’s as they become more and more popular over the years, and they are clicking sell out of fear. So, we need to take a step back and just let cooler heads prevail. Meaning take a long-term approach to everything that you’re doing. You want to always evaluate the portfolio and evaluate your situation and know that you’re in a place that you really know good companies that are going to be there 10, 15, 20, 25 years down the road and be bigger and more profitable then they are today.

There is always going to be something on the radar whether it’s an election, an oil shortage, a war, terrorist attack or in this case of a virus. There’s always going to be something out there that’s going to get the markets reacting. We’re just seeing an extreme case in a very short period of time because we don’t know much about it. Stay the course and stay long term with your outlook.  Remember that many of our clients are focusing more on that conservative size there in a lot of those areas or investments that you need regardless of the state of the economy. Your consumer food, your consumer staples, the pharmaceutical, telecommunications, utilities, energy, items that you must have regardless of if you’re traveling or if you are home or regardless of what the market is doing.  You still have to pay your light bill, buy food, buy diapers, toilet paper, Kleenex, etc. and they all pay a really attractive dividend as well.

As we have sat down over the years, I am sure you heard me talk about many of those things, but what that does is help reduce the risk inside the portfolio. So, you’re not going through as wild ride is what the overall market is. Stay long term with that outlook and continue to stay very well diversified inside the accounts. If you have questions you can always reach out to us.

It’s Possible To Take Advantage Of The Volatility

Another thing to look at as well is how to take advantage of some of the volatility that’s out there. What I mean by that is that when you see this type of pull back and you haven’t contributed into your Roth or into your IRA from a previous or current year, you can start making those contributions to try and buy at a discounted price. Like going to the grocery store and something is 10% off and buy more of that item.

In addition to that what we look at is just continuing to add to your 401ks or qualified plans through work. That’s called dollar cost averaging. You’re putting in at different points throughout the market so you’re going to be able to take advantage of that volatility and buy more shares as the market goes down. As the market goes back up you will own more shares and see bigger gains inside the account.

So, stay long term with your approach, stay very well diversified .  Remember we want you to focus heavily on more of those areas are items that you have regardless of what’s occurring.  Inside the economy and that ultimately let’s take advantage of the volatility if we’re able and continue to add to the 401k’s and so forth to your accumulated more shares for the long term.

If you have any questions regarding your portfolio or anything in specific and you want to reach out, please do. Our phone number is 847-680-9050. You can ask myself or anybody on the team. We’re glad to answer any questions that you may have.