The Big Market Plunge

The stock market has been on increasingly shaky ground over the past several months as valuations raised quickly on dubious fundamentals. When this happens, market get skittish and start looking for any reason to make at least a small correction. That reason popped up this month in the form of the coronavirus.

The coronavirus isn’t actually new. Several strains are already very well known both in the U.S. and abroad, but the latest strain seems to spread more quickly and easily than other strains. As fear of an epidemic (justified or not) rise, investors get nervous and start to look for safer investments.

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While that may not mean wholesale selling out of portfolios it’s easy to see how investors might prune back international investments, and even investments in the United States that depend are harder hit countries like China.

The Big Market Plunge 1

What Investors Should Do About the Coronavirus?

As always, while any market plunge is scary, a well-crafted, regularly refinanced portfolio is best way to invest for the long-term. One day, the coronavirus will be old news, just like Ebola, and bird flu, and the other scary viruses that have made headlines in the past. When that happens markets will go back to normal.

Obviously, for shorter-term investors, now may indeed be the time to trim riskier international and American investments. Even better, now might be a good time to hedge investments with options, hold off on the actual selling, just in case the epidemic never ends up arriving. Check with your financial advisor for how this might effect your porfolio.

Home Prices Rise

The coronavirus is not the only thing happening out there. Assuming there is no large outbreak in the U.S. it is very important to not lose track of other financial events that will effect the market, such as home prices.

Home prices continue to rise. This is a mixed blessing. It means things are going well in the construction sector, and consumers are still confident enough to make home purchases. However, rising prices do price out certain home buyers. For those home owners already settled in place, rising equity fuels higher confidence, or even refinancing, often for remodeling. This feedback loop helps propel the economy.

What To Look For

The market and coronavirus right now are all about uncertainty. If nothing else bumps the market, look for this selloff to be shallow and short-lived. It something else jostles the markets, however, look for this to turn into a much steeper, confidence shaking dip that may trigger the long-coming recession.

As a confidence-based recession, this one might be tough to beat. It is hard to get investors back once they’ve decided they have reason to leave. However, there is still a lot of money floating around out there, along with a lot of long-term commercial construction. That might form the bottom that keeps the recession light and short(ish).

*This article is for informational purposes only and should not be considered investing advice for individuals. The author is not a financial professional and does not hold himself out to be one. Always consult your financial professional or tax advisor for individual advice.

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