Financial Insights

Count On Market Corrections

As the Coronavirus outbreak and additional cases occur around the globe, the markets are reflecting this growing worry. Thus far, the markets have responded in a fashion consistent with past epidemics.

Equity market corrections of 5% to 10% are common, occurring on average about once or twice per year.  History has shown that the most recent drawdown is not significant relative to prior events and, in this context; the market often experiences similar corrections and moves on to positive returns for full-year periods.

Source: FactSet, Standard & Poor’s, J.P. Morgan Asset Management.  Returns are based on price index only and do not include dividends. Intra-year drops refer to the largest market drops from a peak to a trough during the year. For illustrative purposes only. Returns shown are calendar year returns from 1980 to 2018, over which time period the average annual return was 8.4%. Guide to the Markets – U.S. Data is as of December 31, 2019.

The SARS epidemic, for example, drove the S&P 500 down about 14% for the first four months of 2003 and it ended the year up 26%.  There is no assurance that history will repeat, but there is no immediate action to be taken relative to investment portfolios as a result of the virus. Pandemic-related fear typically drives short-term volatility and these events often prove transitory, eventually reversing associated market weakness.

A current market correction is expected and normal. We will continue to monitor the virus and its impact on global markets and we remain prepared to take action if necessary.  In the meantime, equity market volatility is normal and should not be a reason to derail you from your long term goals.

Should you have any questions, please do not hesitate to contact your Wealth Advisor.

The foregoing content reflects the opinions of Advisors Capital Management, LLC and is subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. Securities investing involves risk, including the potential for loss of principal. There is no assurance that any investment plan or strategy will be successful.


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