This week has seen the world stock markets reverse from all-time highs into negative performance for 2020. Despite the volatility and breathless reporting on the financial news networks, not one of our clients has called or emailed with concerns. Kudos to all of you! I am gratified that you understand that growing your wealth requires accepting some short-term market volatility.
Stock prices and other investment prices are set by supply and demand. Essentially, the prices at which willing buyers and willing sellers come together is what determines the market prices of all investments. Countless factors impact these prices. Most recently, the coronavirus outbreak is being blamed for the declines in the stock markets. While other factors have also contributed to the declines, the uncertainty about the impact of the virus on the global economy is causing buyers and sellers to re-evaluate what they believe fair prices are. As such, some who are reacting to a worst-case scenario are willing to sell their holdings at any price. This approach allows security prices to fall further.
In the long run (which we would define as several years), the markets will rise from their current levels and the coronavirus will be bump on the path of long-term economic growth. Of course, this recovery could also occur as soon as March. Economic growth has continued after every calamity the world has ever endured. In the short run, we have to accept the volatility that comes with uncertainty.
As always, your patience and disciplined approach to growing your wealth will deliver better long-term results than over-reacting to short-term market volatility.
We appreciate the trust you have placed in us and the investment policies you have put in place to guide our investment decision making.