Coronavirus shakes stock markets, experts call for focus on long-term goals

iStock(NEW YORK) – The new epidemic of coronavirus has triggered a roller coaster in the US financial markets and has sown widespread uncertainty in the global economy as a whole. With the market rocking and daily headlines causing anxiety, experts say everyday investors should stay focused on the long term.

The markets collapsed with the opening of trading on Monday, enough to trigger a temporary halt in trading by the New York Stock Exchange. The 15-minute shutdown was caused by an automatic circuit breaker safety mechanism that tripped to prevent a free fall after the S&P 500 dived more than 7% within minutes of the dive. market opening.

Monday's market rout comes after two volatile weeks: The Dow experienced its worst week since the 2008 financial crash two weeks ago, fears of a pandemic hitting certain industries and chains 39; supply. Last week, however, hopes for government intervention saw the Dow Jones post its biggest point gain in a day in history on Monday. On Tuesday, the markets fell again and, throughout the week, the boost continued.

"When the markets go crazy like this, it is essential that investors consider their own time horizon," David Bahnsen, chief investment officer of the Bahnsen group, told ABC News by email.

If the main money is needed in one to two years, it should not be on the stock market, he added.

"If, on the other hand, the use of money has a longer-term horizon, investors should let history be their guide on the market recovery, flows and ebbing market volatility, and most importantly, how downward volatility can help them, "Bahnsen noted.

Over longer periods, "a huge percentage of the return an investor will receive from the stock market comes from reinvested dividends," he said.

As uncomfortable as it may be, downside volatility "is your friend" if you add new money to your 401 (k), reinvest dividends and maintain a long-term approach, said Bahnsen.

"The current volatility is a roller coaster, and the roller coaster is going up and down," he said. "It will be settled in due course, but for now, investors should expect it to continue and be an unfavorable environment in which rational and thoughtful decisions can be made."

In situations of widespread uncertainty like this, Bahnsen recommends assessing your own tolerance for personal risk and diversifying investments.

"A smart asset allocation designed around your risk tolerance and truly diverse is your best defense against the volatility of the coronavirus market," he said. "And it will also be your best defense against the next episode of market volatility."

Bankrate's senior economic analyst Mark Hamrick told ABC News that "as far as we are all human, we must keep in mind that two of the greatest emotions that drive stock prices are greed and fear. "

"The # 1 job for investors right now is trying to contain fear," he said. "We must remember that this too will pass."

Hamrick reiterated that now is the time to focus on long-term financial goals more than ever. For most people who have retirement savings on the stock markets, "this money will not even be used for years, if not decades, in the future."

Even for those approaching retirement, "the reality is that they have every reason to believe that they will live long," he added.

"Trying to meet your long-term financial goals means staying invested in the stock market and continuing to focus on saving and paying down debt," he said. "Because the reality is that these are indeed timeless financial goals."

"Sometimes people see these market downturns as a real threat, and the reality is that at some point they probably have to get away from some information that seems ubiquitous these days and try to focus on the long term, "said Hamrick. .

Uncertainty surrounding the coronavirus epidemic and its potential economic impact is behind a "white knuckle fear factor among investors," ABC said. News Daniel Ives, managing director of equity research at Wedbush Securities. "And I think right now, this is the biggest overhang of the stocks."

"The street is worried about declining profits and the impact of demand globally, and right now there are more questions than answers from a business perspective. investors, "he added.

Still, Ives said, "At the moment, I see it more as a short-term shock."

Ives noted that when data points come out of China and elsewhere, "you start to see that stocks reflect bad news before profits go down," he said. "So, in reality, what is happening is that the market is forecasting a 10-15% reduction in profits across the board, which may or may not happen."

"In 20 years of equity coverage on Wall Street, it’s certainly up there with some of the most nervous investors I’ve seen, but I don’t think nervousness matches the sale that I’m # 39; ve seen, which isn’t, "he added.

For investors wishing to look beyond the next six to 12 months, "I see this as a gold buying opportunity," said Ives.

The Wall Street veteran also recommends muffling the noise as much as possible and staying focused on your financial goals, saying he thinks it's "a negative news cycle and a media world." that "scare investors the most.

"In my opinion, the way to handle these situations is to stay with the winners and the technological themes for the years to come – in terms of streaming, cloud computing, cybersecurity, 5G – and turn off the television. "said Ives. "It's a break from the tech bull cycle, not the end."

Still, Ives said investors should prepare for a roller coaster at least in the short term.

"I see it more as a buying opportunity for investors who have a longer time horizon," he said. "It is a time of taking hold, but I think right now, the bark is much worse than the bite."

"For the average investor, this is going to be a roller coaster for the next few months, and this is where you need your stomach for volatility just considering what the investor ; coronavirus epidemic created globally, "he said. "If you don't like a roller coaster, then you should probably take chips from the table, as it will be a pretty volatile race over the next few weeks."

Hamrick of Bankrate noted that there are also opportunities among the volatility for Americans to increase their savings.

"There is currently an opportunity that could ultimately help accelerate savings, and that is that mortgage interest rates have fallen to historically low levels," he said. declared.

In a recent annual survey on Bankrate, Hamrick said that the biggest financial regret in the United States was "systematically the failure of savings for emergencies and the failure of savings for retirement ”.

Times of economic uncertainty "really test this kind of thing," he added. "Once we get past that, we hope people will remember it."

"As we like to say, pay yourself first by having an automated direct deposit savings account so that we can overcome challenges such as temporary unemployment," he said. "You must have an emergency kit. Consider a savings account as an extension of this. "

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