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Keeping Focused on your Long-term Goals

Market Commentary

After strong market returns in 2019 and continued upward trajectory in January, global equity markets have confronted heightened volatility.
The S&P 500 posted a negative return of 8.3% year-to-date, but still has positive returns for the trailing 12-month period ending February 28, 2020. The U.S. Treasury market has served as a safe haven, resulting in interest rates declining to record lows.

John Packs - Senior Investment Officer

John Packs
Senior Investment Officer
AIG Retirement Services

The recent market decline has been triggered by impacts surrounding the Coronavirus, officially known as COVID-19.

As uncertainty remains regarding the public health aspects of this virus, it’s still too early to answer key questions such as how many people will be affected and how long will this virus last. This public health ambiguity has been transmitted into the financial markets with concerns around the impact to supply chains and future economic growth.

Additionally, there is the concern that a continued slowdown in growth could trigger a global recession. As with any period of market volatility, it’s important to maintain a long-term perspective and remember time-tested principles of financial planning and investing.

Given this environment, investors should consider the following:

  1. Focus on your long-term investment goals—What are you saving and investing for and where are you in that life journey? It is about where you are going, not where you have been!
  2. Revisit your asset allocation. After a multi-year bull market, your strategic asset allocation may have moved from its original plan. You may need to rebalance your portfolio or revisit your strategic asset allocation to align with your financial goals.
  3. Review your investments. Do you have the underlying investments necessary to execute on your strategic asset allocation?  Are they consistent with your return expectations and risk profile?
  4. Make sure you have a portfolio that lets you sleep at night. If the market moved 10% up or down next week, would you be comfortable with the change in the value of your portfolio. The speed and severity of the selloff reminds us that markets can move quickly. Moreover, many investors may have been less focused on their risk tolerance, given the high-return low-volatility markets of recent years. Use the lessons of this month’s volatility to revisit what level of risk you are willing to accept in your portfolio.
  5. Finally: Remain calm and stay focused on the long term. Since 2010, there have been six market corrections (market declines of 10%) or more. Corrections happen; bear markets happen (down 20%from a high). Recovery from these events can be short (months) or long (years). While it is too soon to know what direction the market will take, it is not too soon to plan and to be prepared!

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