Monday, March 9 marked the beginning of the stock market crash of 2020 – with the Dow’s largest single day point loss in history. That day was followed by two more huge drops on March 12 and 16, and so far, we’ve seen the three worst single-day point drops in U.S. history. And sandwiched right in there was the largest one-day gain.

Is it any wonder the question many are asking is, “Should I ride this thing out – as many advisors have traditionally recommended – or do I stand to lose a ton more by waiting for things to bounce back?” 

I’d like to suggest some concrete questions you can ask yourself and some practical action steps you can take to increase your financial certainty. Because whether you’re still working, retired, or getting ready to retire (or were prior to this calamity), uncertainty seems to be the primary thread running through our lives today.

The first variable to consider is the speed with which the markets have recently declined. It only took the S&P 500 22 trading days to fall over 30% from its record high reached on Feb. 19, making it the fastest drop of this magnitude in history. 

According to Bank of America Securities, the second, third and fourth quickest 30% drops on Wall Street all occurred during the Great Depression era – in 1934, ’31 and ’29, respectively.

In other words, nothing like this has ever happened before, but the closest thing to it was nearly a century ago, during the worst economic downturn in our country’s history. 

The second factor to consider: How much further could the markets continue to drop? 

During the Great Depression, it took a full 42 months for the market to find its Depression-era low. By 1932, the Dow Jones was down 89% from its previous record high. Further, it took 25 years for it to reach its previous high. 

In a March 23rd article in Forbes online, Senior Contributor Chuck Jones indicated it was very plausible that markets could drop another 20-40%. 

But wait, I can almost hear you say… It’s come halfway back up.  Fair enough. And that’s a very good thing.

However, so, too did the market in the Great Depression. On September 16, 1929, the market crashed by 33% in a period of 3 months, and then it began to claw its way back. Over the next four months, it gained nearly 22%, before continuing its dive to the bottom. Altogether it declined by 89% over a 42-month period. In today’s market, that would reflect a low of 3250. If you had $500,000 saved for retirement, that would leave you about $50,000. So, when is the best time to stop losing money?

Warren Buffett is famous for his Rule No. 1: NEVER lose the money, and Rule No. 2: NEVER forget Rule No. 1. Buffett always understood that the best way to make money is to start by not losing what you already have. We think that’s elementary, but apparently a lot of people disagree.

The third indicator is the alarming rate of unemployment being caused by the virtual shutdown of our nation. Over 22 million Americans have applied for unemployment in just the past four weeks. The previous record in this country was just under 700,000 claims in one week – filed in a single week back in October of 1982.

Economists at the Federal Reserve project total unemployment could reach 32.1%, totaling 47 million Americans. As if that wasn’t enough, that’s another 47 million people potentially without health insurance. And how many of those people won’t have jobs to return to?

The fourth variable you should consider is the impact this outbreak is having on major industries and the economy worldwide.

The retail industry – which is normally responsible for contributing $2.6 trillion, or about 25%, to the annual GDP – has nearly ground to a halt with stores closing. 

The hospitality industry is losing roughly $1.4 billion a week with travel restrictions now in place globally. According to Reuters, global airlines estimates their 2020 revenue losses at over $250 billion as planes sit idly at gates everywhere.

According to Goldman Sachs, the world economy could shrink by an estimated 34% in Q2 2020. With a total global output of around 86 trillion dollars, that could mean a loss of over $25 trillion in a single quarter. We have never seen financial devastation like this. What does that mean to the markets?

Well, first, it virtually guarantees continued market volatility for months to come. Second, it means additional economic stimulus will likely be required by the government, which could lead to higher taxes in the future as we all must help repay the funds used. The bottom line, though, is we just don’t know. This is totally uncharted territory.

But all of this could obviously be greatly improved if we just stemmed the tide on the coronavirus outbreak itself, right? That’s our fifth indicator.

The U.S. now has the highest number of known COVID-19 cases in the world, quickly surpassing China and Italy. There are currently over 750,000 Americans suffering from it, and more than 40,000 people have died from it in the U.S.

And those numbers, by many accounts, are surely very conservative – as people in many states struggle to even be checked for it due to the shortfall in tests. 

If it continues at its current pace, over 80 thousand people could die by the end of May, and unchecked, the virus could take 10s or hundreds of thousands more. 

When is the best time to stop losing money? Many people who’ve been invested over the past decade are still sitting on some solid gains. Maybe the best time is now. Give us a call if you want to find out how you can recover your losses while locking out any more losses in the future.

Stephen Kelley is a recognized leader in retirement income planning. Located in Nashua he services Greater Boston and the New England areas. He is author of five books, including “Tell Me When You’re Going to Die,” which deals with the problem unknown lifespans create for retirement planning. It and his other books are available on Amazon.com. He can be heard every weekend on “The Free Money Guys Radio Hour” on WCAP and WFEA, and he conducts planning workshops at his New England Adult Learning Center, located in Nashua. Initial consultations are always free. You can reach Steve at 603-881-8811 or at www.FreeToRetireRadio.com.

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