COVID-19 and the Financial Markets

Market Update from Robinhood

The financial markets are reeling from the COVID-19 pandemic. An email I received this morning from Robinhood shows just how much the market was impacted in the past week alone. And, while President Trump trumpeted the glory of a 2,000 point recovery in the DOW during his address to the nation yesterday, the truth of the matter is that we are likely to see a significant recovery any time soon.

I try not to look at my two investment funds, the Thrift Savings Plan (TSP) and Acorns, too often. After all, they are not brokerage accounts set up for day trading of stocks and bonds. Rather, they are long-term investments. However, I looked at them this morning just to get a sense of where they stand. Let's look at Acorns first, where I have my portfolio set to Moderately Aggressive.

Acorns Moderately Aggressive Portfolio

The Moderately Aggressive portfolio offered by Acorns is billed as ideal for those with a longer-term investment plan and a higher tolerance for risk. As such, it invests heavily in large-company stocks through the Vanguard S&P 500 ETF (VOO); 38% to be exact. And, from what I have noticed, VOO appears to be the biggest mover and shaker in the portfolio.

A Dismal 3-Month Return

Looking at my 3-month return on Acorns is, well, pretty scary. I have "lost" 14.38% during that time. And, I say "lost" because I am in it for the long haul. I will not lose any money until I cash out and lick my wounds. With this downturn in the market, I am not panicking and will hang on to see the recovery. My only hope, as a long-term investor, is that it will stay down just a while longer so that I can buy more into this significant drop and reap the benefits when the market recovers; and, it will recover. We say a pretty stiff drop in 2008 during the recession and, well, my TSP account took a nosedive into previously unchartered territory for me. However, I moved much of my investment there into the high-risk sector and ended up recovering very nicely. Coincidentally, I moved a large chunk of it back to a more moderate approach just a couple of months ago; a move I think I am glad I made.

Speaking of TSP, it has also been taking a beating as the market turns down. Looking at my balance as of Friday, March 13, my TSP account is down nearly as much as my Acorns account: 16.3%. Over the course of the past three months, my TSP has "lost" nearly $5,000 in value. Again, it is not lost until I start selling off shares by pulling money out which, since it is a retirement account, I cannot do without paying taxes on it. So, I leave it to sit and wait for the market to recover again. The only thought I have with my TSP right now is, do I move my money back into the high-risk funds in hopes of a great recovery? The problem therein is that we just do not know when the bounce will happen and, like I said previously, the TSP is not a day trading account.

We all need to face the facts here. The markets are going to be in turmoil over COVID-19 for a while. This virus outbreak is unlike anything most of us have seen in our lifetimes. There have been a couple of large influenza outbreaks globally in the past 100 years, in 1918, 1956-58, and 1968. I am not old, by any means, but I get the feeling that the markets are reflecting a lot of uncertainty with a younger generation who has not seen the effects of something like this on the global economy. That said, I am prepared to sit it out and wait for the long-term to see what happens. I think most of us should. We will recover, just like we have from everything else, and those of us who patiently wait will be rewarded well for doing so; just my personal take on the COVID-19 outbreak and the financial markets.