Apr 1, 2020
We all have events in our life that impact us. Some are more serious than others. Some are more universal than others. We can deal with weather-related crises, but now the ultimate test challenges us. The Coronavirus pandemic has rocked and shaken our world.
When people get overwhelmed and panic, they often lose their ability to cope. Some cannot rebound or bounce back, and they shut down. After a crisis, and after the fight-or-flight stress reaction and adrenalin-based feelings start to subside, the long-term effects don’t just go away; they impact us emotionally and physically in terms of our ability to cope. Decision-making is also somewhat impeded.
We Have the Ability to Thrive
Dr. Salvatore Maddi, psychologist and professor at the University of California, Irvine, introduced the concept of hardiness while conducting a study at Bell Telephone. When deregulation, layoffs and restructuring affected some of Bell’s employees by having adverse effects on mental and physical well-being, Maddi discovered others actually grew and thrived from the stress. The research upheld the notion that those who saw change as a positive challenge, who were open to new ideas, who felt confident and capable, and who problem solved rather than avoided the stress, actually did better.
In psychological terms, hardiness is a combination of personality traits that allow a person to cope and withstand physical and psychological stress without developing physical illness. This particular mindset and personality type is one that views difficulties and stressful situations as personal challenges and opportunities, rather than as roadblocks or threats, and allows for personal growth in the face of adversities.
In reality, it resembles going through an illness or death of a loved one, divorce or a developmental change in your life, such as having a child, or when an older child leaves home. Life changes categorically impact our ability to make rational decisions when we don’t have the coping skills to rebound and function as normal. Even after the initial crisis, the lingering effects could result in a loss of confidence and anxiety about the future.
Market Sell-Offs and Panic Buying
The stock market is a leading indicator that looks forward not backward. At first, when the Coronavirus took hold in China and then Italy, the stock market recoiled. Investors clearly saw trouble ahead. Compulsive selling drove the Dow and other markets down every day. Oil prices sank. The ripple effect was perhaps as shocking as the global public’s reactions.
What ensued was panicked grocery shopping and hoarding. But worse, job loss resulted as businesses locked their doors and essential employees worked from home. Lockdowns, stay-at-home orders and social distancing were enforced, as was self-quarantining. Shortages of medical supplies, personnel and facilities resulted in rising death tolls and enormous amounts of sickness.
As of this writing, there is no vaccine to treat the Coronavirus outbreak and the number of new cases continues to rise around the world. Nevertheless, we are committed to helping our clients and the communities we serve get through this crisis. Our employees are working remotely, but are fully equipped to deliver the highest level of expertise and support to you.
Will You – and the Stock Market Recover?
There is no reason not to recover. Economies grow and retract, as do financial markets. Fear of further market declines is normal and expected. However, any temptation to sell off parts of your personal stock portfolio in this or any crisis is most likely not in your best interest. Your values are lower. Selling low and buying high has not been the formula for long term success.
In the article, “Stocks for the Long Run,” appropriately titled and found here on our Hefren blog page, Vice-Chairman Craig A. Tillotson and Brian J. Koble, CFA®, remind you that your stocks are not for short-term spending needs – cash and bonds are – and your portfolio is designed for long-term.
“This type of thinking poses a risk to meeting your long-term financial goals. To have confidence to stay the course with your personal financial plan, it is necessary to have a proper understanding of the role of stocks in your portfolio: why you own them and what they’re designed to accomplish.” They each highlight important points to remember and the article is worth checking out.
We wish we could tell you when the markets – and our lives – will return to normal. One well-known marketing guru once said, “I’d tell you - but my crystal ball is being repaired.” No one really knows for sure. But what we do know from experience is to follow the signs. There are points of optimism ahead and no shortage of minds thinking the same thing: “And this, too, shall pass.”
At Hefren-Tillotson, we strive to be recognized for our unrivaled combination of successful wealth management and exceptional client service. If you need our help to guide you forward in good times and in troubled times like this, please let us know. We would be happy to help.
DISCLAIMER: Past performance does not predict future results. This report is based on data obtained from sources we believe to be reliable. Hefren-Tillotson does not, nor any other party, guarantee the accuracy or completeness of this report or make any warranties regarding results obtained from its usage. All opinions and estimates included in this report constitute the firms judgment as of the date of this report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation to buy or sell the securities herein mentioned.