Covid 19 – an Update

The wild market swings continue and fear is still strong as we deal with the Coronavirus pandemic. I participated in a conference call recently where experts weighed in on the current situation, both from a medical perspective and an economic standpoint. I wanted to share some of the bottom-line statements to help us cut through much of the media hype and focus on the data points that are important.


  • The US was able to “watch and learn” as other countries dealt with Coronavirus before us
  • The “social distancing” has the potential to greatly reduce the overall impact of the virus on Americans
  • China’s virus effects are tapering down quite dramatically, and factory production is beginning to increase again
  • The economy was in great shape. If you’re going to endure something major like this, it helps that we were in a good overall economic position to “weather the blow”.
  • The world bank is estimating a GDP slowdown of 1% under mild effects, 2% for moderate effects, and 5% as a sever pandemic. This isn’t good news of course, but if we can keep to a 2% or less reduction, the markets should be fine. For perspective, we saw a 4.3% GDP reduction in 2008.
  • With warmer weather on the way, we will hopefully see a drop in contagion (similar to cold and flu)
  • The general consensus I’ve seen from multiple professional investment managers is that the markets will likely be much higher by the end of the year


  • Market volatility has been incredibly high with 10% swings both down and up. This is nerve-wracking for any investor.
  • There is still much “unknown” about the virus
  • The GDP will be affected, but we don’t know to what extent
  • Corporate earnings will be affected, but we don’t know yet to what extent
  • The shut-down of events across the US may help curtail the medical effects of the virus, but it will hurt corporate America

With this information, it seems wise to hold the course. Our advice really hasn’t changed at all with this new data; but rather, it was reinforced. Below is the same advice I provided in our last post. Hang in there, StrongTower family!

What is the WISE thing to do in times like these?

To answer this question, we must consider the phase of life you are in right now.

  • Accumulation Phase

    If you are still saving towards your goals, you are in the “accumulation phase”. So, if you are still saving towards college, retirement, or other goals, this one is for you. Market declines like this can sometimes work in your favor. So, go ahead and say, “Woohoo! The markets are down!” OK, don’t do that or you might get slapped by someone in the “distribution phase”. The reality is that stocks may be selling below fair value right now, which provides buying opportunities. So, keep making those regular deposits into your accounts and buy stocks while they’re cheap. We don’t know where the bottom will be on this particular market cycle, but we know that stocks are priced better today than they were 3, 6, or even 12 months ago.

  • Distribution Phase

    If you are already at the point where you are taking money from your accounts, then you are in the “distribution phase”. So, if you’re already getting those monthly withdrawals from your account for retirement income, this one is for you. Market declines are harder to handle when you’re in this phase because monthly income is dependent on your account growth. There are some very important things to keep in mind:

    1. When we project your retirement needs, we assume that market drops like this will happen. They are built into our calculations.
    2. When you are taking money from your accounts, you are typically invested more conservatively than you were in the past. This is vitally important. For example, if you have a “moderate” blend of investments, you have roughly a 60/40 split between stocks and bonds respectively. Not only does this help protect you when the markets drop like this, but we can take your monthly checks from your bonds, which allows more time for your stocks to rebound.
    3. We like to keep about six months of your monthly withdrawals in cash. This also helps us to avoid selling stocks while they are down.
    4. Some clients have enough margin built into their finances that they can reduce their monthly withdrawals during a market drop. This isn’t usually necessary, but it can be wise to “tighten the belt” through a rough patch.

1 Comment.

  • Linda Rowland
    March 20, 2020 3:56 pm

    Thanks Todd, I really haven’t worried, mostly concentrating on staying healthy. I trust you and your Godly wisdom.