The world keeps changing quickly. As China loosened lockdowns with a continued decrease in local cases of COVID-19, one in five Americans are now ordered to stay at home to slow the spread of the disease. And markets are moving quickly as well, with the stock market declining 15% last week, having turned from a bull to a bear market in record time.
At the same time, the bond markets and the US dollar have benefited during 2020 from investors looking for safety, with US Treasuries up some 3.5% and the US dollar having its best week since 2008.
Unfortunately, there will almost certainly be continued market volatility, as policy makers roll out additional actions to fight the economic slowdown and markets vote in real time on whether those actions go far enough. It’s almost like a conversation between the markets and policymakers, in a rapid feedback loop.
Here’s a rundown of what’s been happening — and what we’re doing here at Ellevest to help you with your money right now.
What’s being done to help people financially?
This morning, the Federal Reserve announced an “aggressive” range of new programs to help markets function more efficiently, including buying financial assets and making loans to “Main Street” (small and medium-sized) businesses. It also recently took emergency measures to add money to the economy, including cutting short-term interest rates to 0% and stepping in to buy bonds, mortgages, and short-term debt.
Congressional aid: A stimulus package said to be worth up to $2 trillion is being considered now. It may include sending checks directly to Americans. The new Families First Coronavirus Response Act guarantees extra paid leave for eligible sick people and caregivers, along with free testing.
Pauses on financial obligations: The IRS has extended the tax filing deadline to July 15. Eligible homeowners can defer mortgage payments, and there’s a pause on foreclosures and evictions. Some local governments have halted evictions of renters. The government waived interest and let borrowers ask for a 60-day pause on their federal student loans.
President Trump declared a national emergency, which allows FEMA to direct money from a $40 billion account to give aid to the states.
Ellevest is here to help
Our financial planners, investing experts, and career coaches are here to help you with the guidance you need.
We are committed to answering all of your money questions personally as they come in. Whether they are questions about investing, financial planning or your career, please send them to firstname.lastname@example.org. We’ll respond to you directly. We’re anonymizing and answering them here, so you can see what other people are asking.
We’re holding Instagram Live Office Hours with our experts several times a week, again to answer your questions. This week:
Tuesday March 24, 2020, 3 PM EDT: How to make career decisions in times of uncertainty, with lead career coach Stephenie Girard
Wednesday March 25, 2020, 3 PM EDT: Is now a good time to invest? Investing Qs answered, with Sallie Krawcheck and senior portfolio manager Ankur Patel
Thursday March 26, 2020, 3 PM EDT: What a recession / market volatility means for my retirement, with financial planner Rachel Rabinovich
We have free Zoom workshops to help you learn more.
Wednesday, March 25, at 8 PM EDT: How to think about stock market volatility, with our lead financial planner Rachel Sanborn Lawrence. Sign up for free here.
We’re constantly creating more resources from our experts to help you:
What this can mean for your investments, if you’re a client
First of all, we plan for markets like this: At Ellevest, we use realistic market scenarios to create your portfolio recommendations. This includes the possibility that a downturn as severe as the one we’re seeing now could happen at any time. That’s why the portfolios we create for you are highly diversified — with money in different types of investments that move differently from one another — so that all your eggs aren’t in one basket.
We are monitoring your portfolio and rebalancing as needed: The market volatility means that your portfolio may have drifted from its target asset allocation (the recommended amount of stock vs bonds vs other types of investments that you own).
At Ellevest, we monitor your portfolio and automatically “rebalance” it back to its recommended target whenever your stocks or bonds drift by 2–3%, depending on your investing goal. We rebalanced more than 12,000 client portfolios this past week.
Rebalancing often means buying into asset classes that have declined (and gotten less expensive) and selling those that are relatively more expensive to get you back to your target. When that happens, you’re automatically “buying low” or “selling high” — the holy grail of investing — without having to do a thing. That’s a plus when emotion has overtaken the market.
We take your time frame into account in building your investment portfolio: We shift your portfolio recommendations to be more conservative, with fewer stocks and more lower-risk investments like bonds, to help reduce risk as you get closer to your goal date.
Remember that, historically, the market has gone up over the long term. It is important to keep in mind that the markets have gone down like this in the past, and they have recovered every single time. In fact the average annual return in the equity (aka stock) market since 1928 has been 9.7%. Some years were much better (like last year, when the equity market returned 31.2%), and some were much worse (like 2008, when the market was down 36.6%) — but through those ups and downs, the average was a 9.7% increase.
Despite this, it can be tempting to take your money out of stocks during times like this. But if you try to get out of the market when it’s down and go back in when it’s up, you risk missing the good days. If you had missed the ten best days in the stock market over the past 20 years, your return would have been cut in half.
So it’s “time in the market” rather than “timing the market” that has historically worked best. And that’s why we generally recommend that if you have a long-term investing goal, the best thing to do is keep going and let time do its thing.
We’re here for you: If you have questions about your portfolio or any money or career issue, please reach out at email@example.com. We’re in this together.