This is undoubtedly an unsettling time for all of us as the coronavirus fears, falling oil prices, and concerns about the implications on the economy have rattled the global financial markets. The markets can digest bad news, but even worse than bad news is uncertainty, which defines this environment we find ourselves in- and that’s what is driving the extreme volatility we are experiencing day-to-day. No one knows how long this will play out and how significant the implications might be.
While the situation we are all experiencing is unprecedented and while the short-term pain is real, the markets have withstood much more over time including plagues, wars, famines, market crashes, 9/11, and other shock events- and will survive this too. We are likely, however, to see significant market volatility continue for a while as global economic activity is halted – and this will probably persist until we have more clarity and until we start seeing the results of all of the proactive steps taken by the Fed and government.
Over time, investors have been rewarded for staying focused on the long-term and avoiding reacting to short-term market fluctuations. While it is sometimes challenging to stay the course, it is important to not overreact in times like these- and to stay true to one’s long-term investment objectives. Over the past 10 years through the end of 2019, the S&P 500 Index generated a return of over 13% per year. If as an investor you had missed just 10 of the best trading days during that time period, your return would have been reduced to 9% per year. Those who sold all of their stock investments after the 2008-09 market crash learned that difficult lesson firsthand.
CERF’s pension plan has a long-term investment time horizon as it is structured to support our plan participants for years to come. Our investment portfolio is well-diversified and comprised of quality, institutional investment strategies. The CERF board and staff, with the assistance of our investment consultant, monitor our investments on a regular basis. While there will be some short-term impact to the portfolio due to these markets (as has been the case with other challenging times we’ve experienced in the investment markets over the past 25 years), we maintain our confidence and conviction that we are well postured for continued growth into the future.