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Keeping Things in Perspective

Managing a Practice

By all accounts last week was pretty bad for the market. All of the major indices fell by more than 10%, and the business news outlets all highlighted that it was the markets’ worst weekly decline since October 2008. 

Comparisons to the financial crisis that began in October 2007 are as inevitable as the expectation that the coronavirus outbreak will get worse before, as we all hope, things get better. 

But it is our job as retirement plan professionals to keep things in perspective—to remind the plan sponsors and participants we work with of the importance of maintaining a long-term view.

Yes, last week was terrible and it may in fact get worse. At this point, we really do not know whether this coronavirus-induced market shock will lead to the long-feared market "correction” that some “bear analysts” have been predicting during this 11-year market rally. Nor do we know whether, as some medical experts are already suggesting, the spread of the coronavirus could begin to abate as Spring brings warmer weather. 

But if you want to consider a worst case scenario, here is something to consider: During the last financial crisis, induced by the mortgage-backed securities crisis, the DJIA lost 50% of its value from October 2007 till it reached bottom in February 2009. That took 16 months. 

It took 56 months—February 2009 till October 2013—for those losses to be recovered. You could say that over a span of 6 years the market didn’t “do” anything. However, since that point, the DJIA has increased by approximately 48% in a little more than 5 years—even taking into account last week's losses. That is pretty darn good by any measure. And an important reminder for those planning to jump ship and “play the market.”

It's a good time to remember that we all play an important role in helping retirement savers maintain perspective... to remind working Americans that saving for retirement is a long-term endeavor. 

And it wouldn’t hurt to remind them to wash their hands as well.