February stock markets worldwide closed with a week of steep down days after reaching a new peak on February 20. A 10% drop from a peak is the definition of a market correction so stocks “corrected” last week from a position that suddenly seemed too high for the current circumstances. The stock market always looks forward, reacting to what investors think will happen next. Last week it repositioned itself to accommodate the threat of a worldwide pandemic and the effect that could have on global supply and demand.
Your February month end report shows how your portfolio has handled this correction. Year-To-Date the DOW is down 11% and the S&P is down 8.5%. It is never easy to see account value drop but it could be much worse. When investors decide that the threat of COVID-19 is past and the future looks good, stock prices will rise again. That is just how it works. It is the unpredictability factor that actually creates the market and coping with that volatility is the price of the benefits.
The threat of a highly contagious and virulent virus becoming out of control among humans worldwide is seen by some as an increasing risk. We hope to be lucky with this one as we were with SARS and EBOLA. Massachusetts recommends we prepare as we would for a major blizzard like ‘78 (while hoping it “goes out to sea”). The stock market has already prepared. It may drop further if the threat increases. As hard as it is to see account values decrease, it is the human suffering at risk here that really matters. The markets will recover.