The most frequently asked question from all our clients during the month of February was, “When is this market going to correct?” Ask and ye shall receive! It’s official. As of 11:00 a.m. this morning, the S&P 500 is down 11.08% on a YTD basis. Who knows if it will rebound by the end of the day.

We should understand that there’s a flip side to this story and it’s in bonds. On a YTD basis, S&P reports the yields have dropped about 0.57% and that’s translated into a 3.26% positive return on the 10-year Treasury.

What’s this mean for you?

As you know, we believe in owning multiple asset classes in portfolios. Diversification is about owning asset classes that behave differently in the same market and economic conditions. On a YTD basis, the BPU Global 60 Model Portfolio, based on my mom’s account – Love you Mom! – is down 3.64% this year, not 11!! If we look back 12 months, her account is up a little over 7%. Your account may be different based on your contributions, withdrawals and fees, but you get the idea. We haven’t approached horrible yet.

Corrections are part of the market story. In fact, in the last 40 years, we’ve had 40 intra-year declines. Twenty-two of them were greater than 10% but under 20%. We should also recognize that in 30 of those 40 years we’ve had positive returns. Also, the average correction lasts about 4 months or so and the average bear market lasts about 14 or 15 months. These conditions don’t last forever.

People have asked me, “What’s our biggest risk?” In my opinion, our biggest risk is that China might close for business until this thing settles down. The Chinese people won’t go to work because they’re afraid of contracting the virus. China, in my view, occupies way to large of a place in our supply chain. We get everything from medicine raw materials to i-Phones from China. If China closes, even for a little while, our supply chain is not diversified enough to avoid some economic impact. As an aside, we, as a nation, should work on this.

What’s the good news?

While coronavirus has not yet been declared a pandemic, we’ve had pandemics before – and, I bet, you don’t remember the market impact. The Swine Flu was an official pandemic. It affected people from June of 2009 through October 2009, killing 575, 400 people world-wide, according to the Centers for Disease Control. Today, the Swine Flu shows up every year and we just treat it.

In stark contrast, the CDC reports, as of today, that there are 80,238 cases worldwide, with 2,700 deaths. While one death is one death too many, there’s currently no comparison. Don’t forget that the CDC also tells us that in any given year, between 250,000 and 650,000 people die of the regular old flu.

So, I think our key takeaways are that markets correct for all kinds of reasons, every year. So, you should diversify because bonds usually go up when stocks go down. Second, this is not yet, not close to a pandemic. Third, keep calm, wash your hands and carry on.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.


There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-
diversified portfolio. Diversification does not protect against market risk.


BPU Investment Management is not affiliated with LPL Financial and Wealth Enhancement Group.