MIAMI (CBSMiami) – The coronavirus outbreak isn’t just a global health concern, it’s also been economically disruptive.
U.S. stocks plunged for the second day in a row. And over the last four trading sessions, U.S. stocks have lost a total of $2.1 trillion in value.
Charles Sachs, director of planning at the financial firm Kaufman Rossin, stopped by the CBS4 Studio to help make sense of it all.
What Started The Sell Off?
“The market is always a mechanism looking for forward expectation of for company’s earnings. And so the market typically sells first and asks questions later,” he explained. “So when we see the fact that containment isn’t really working and it’s continuing to spread, the market reacts. This is what we’ve been seeing the last few days.”
What’s His Advice?
“First off, don’t panic. The market is really the only thing that’s going to give you the growth that you’re going to need for the long haul, so you need to stay in it. You don’t need to be 100% in it. Arguably, there should be some mixture stocks, bonds, alternatives, cash, etc. And so if you liked your asset allocation a week ago, you should still like it today.”
How Can The Government Calm Investors’ Fears?
“Really, the government is somewhat limited. They’re looking at some things. The Federal Reserve may make some changes. People need to understand that when you’re in the market, the tradeoff for earnings, somewhere around 10% on average returns for being in the market, is volatility. If you didn’t have that volatility… you’d get 1 or 2%. If you look back in time, markets were dropped about 7% to 8%. That’s going to happen every year. If you go back to 2018, there were two drops of at least 10%. Early on in January of 2018, a 10% drop. Toward the end of the year, people have short memories, December, down around 20%. This is nothing new. People need to be prepared for a bumpy ride.”
What About Those Not Invested In The Stock Market?
“Right now is a perfect example here in Miami. Probably fewer people want to book vacations. Certainly people may not want to go on as many cruises, conventions, all the things that we thrive on in our local economy… people will give that a second or third look.”