The Markets
Please don’t scream inside your heart.
Last week, a reopened Japanese theme park asked patrons to wear masks to help reduce the spread of coronavirus. It also asked them not to scream while riding the rollercoaster. “Please scream inside your heart,” park management urged.
During 2020, stock markets in the United States have taken investors on an emotional rollercoaster ride. By late March, the Standard & Poor’s 500 Index had lost more than 30 percent. The Index has since regained most of those losses, although there have been many ups and downs along the way.
The culprits behind market volatility have been fear and uncertainty, often inspired by twists and turns in the coronavirus saga. Last week, as stocks faltered and demand for U.S. government bonds surged, Eric Platt and Colby Smith of Financial Times reported:
“The strong demand for [safe] haven assets emerged after several U.S. states reported further increases in coronavirus cases, after Florida on Thursday recorded its largest death toll since the crisis spread to the United States. Some succor was provided to nervous investors on Friday after [a pharmaceutical company] released data showing its potential coronavirus treatment…had reduced mortality rates in early trials. That provided a bump to stocks and tempered the gains in Treasuries.”
Volatile markets often cause investors to become uneasy. Sometimes, the emotional rollercoaster causes them to focus on short-term performance rather than long-term financial goals. Today, market fluctuations, in tandem with health concerns, work anxiety, and social distancing requirements, may trigger a stronger response than usual, making investors particularly vulnerable to the emotional biases within us.
If short-term market swings are making you restless or uncomfortable, don’t keep it to yourself. This is a good time to re-evaluate your risk tolerance, review your financial goals, and make sure you have enough cash to meet current needs.
Data as of 7/10/20 | 1-Week | Y-T-D | 1-Year | 3-Year | 5-Year | 10-Year |
Standard & Poor’s 500 (Domestic Stocks) | 1.8% | -1.4% | 6.4% | 9.5% | 8.9% | 11.4% |
Dow Jones Global ex-U.S. | 1.4 | -9.0 | -3.1 | -0.1 | 0.8 | 2.6 |
10-year Treasury Note (Yield Only) | 0.6 | NA | 2.1 | 2.4 | 2.4 | 3.1 |
Gold (per ounce) | 1.7 | 18.4 | 28.0 | 14.2 | 9.2 | 4.1 |
Bloomberg Commodity Index | 1.5 | -17.6 | -17.2 | -6.8 | -7.7 | -6.2 |
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, MarketWatch, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
