Day: February 28, 2020

Personal Finance Daily: If the coronavirus spreads in America, food delivery companies could see a surge in demand — are they ready? and what the Democratic presidential candidates want to do to your taxes

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Barron’s wants to recognize people and organizations whose products, services, or education programs are making an impact to improve the financial health of individuals across the U.S. Be sure to head to barrons.com/celebrates for more information and to submit a nomination by March 15 for the Barron’s Celebrates: Financial Empowerment program.

TGIF, MarketWatchers. Don’t miss these top stories:

Personal Finance
Austin and Nashville were the U.S.’s hottest job markets last year

These top-ranked cities — both state capitals in the South — share other characteristics, too: well-known universities, booming job markets and an intangible cool factor

If the coronavirus spreads in America, food delivery companies could see a surge in demand — are they ready?

People who isolate themselves with ‘social distancing measures’ would still need food.

Why fans of country music star Garth Brooks thought he was backing Bernie Sanders

The country music legend wore a ‘Sanders 20’ jersey, which sent many on social media into a frenzy.

Joe Biden wants a first-time homeowner tax credit, Amy Klobuchar would clear housing voucher backlog — where the Democratic candidates stand on affordable housing

‘One sure way we can make sure that kids get a good start is if they have a roof over their head and a stable place to live,’ Sen. Amy Klobuchar said at Tuesday night’s Democratic presidential debate.

Two years after the Tax Cuts and Jobs Act — who are the winners and the losers?

There’s a disconnect between who actually benefited from the TCJA and who thinks they benefited.

You’re miserable at work. Here’s what to do short of quitting

Try one of these four strategies.

Michael Bloomberg is America’s No.1 philanthropist — how much of that is to spread his political influence?

‘Most people don’t think of charitable dollars as being an avenue to political influence, but it is,’ says David Callahan, author of ’The Givers: Wealth, Power, and Philanthropy in a New Gilded Age.’

What Bernie Sanders, Elizabeth Warren and the other Democratic presidential candidates want to do to your taxes

All the Democratic candidates say wealthy taxpayers and businesses should pay more — but that’s where the agreements end.

There’s a new watchdog for taxpayers at the IRS

The National Taxpayer Advocate flags problems that make life difficult for taxpayers.

One possible coronavirus side effect — cheaper almonds for U.S. shoppers

China is the No. 2 buyer of American almonds, but with ports closed, inventory could pile up.

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Kudlow, urging stock buying, says the coronavirus threat to the U.S. is low

Top White House economist Larry Kudlow on Friday said investors should think about getting back into the stock market as the Dow Jones Industrial Average was on track to its worst weekly loss since 2008 over fears the COVID-19 epidemic may impact the global economy.

Congress works on providing $6 billion to $8 billion to fight coronavirus

U.S. lawmakers are working to provide between $6 billion and $8 billion in emergency funding to fight the coronavirus causing the disease COVID-19, according to multiple published reports citing unnamed sources.

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Federal Reserve Chairman Jerome Powell on Friday said the central bank was ‘closely monitoring’ the risk to the U.S. economy from the coronavirus epidemic.

The situation in China is even worse than you think, says this analyst with a history of accurate calls

The China Beige Book surveys thousands of private-sector participants in China to get a sense of what’s going on in the real economy. Right now the situation is grim, says its CEO.

The Fed can’t stop coronavirus from slamming the economy, but it could ease the pain

Contrary to what everyone is telling you, the Federal Reserve might actually be able to help if the economy began to weaken because of the coronavirus.

If the coronavirus spreads in America, food delivery companies could see a surge in demand — are they ready?

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GREG BAKER/AFP via Getty Images
Chinese workers in February carrying a cart of vegetables meant as groceries for nearby residents.

From movie chains to luxury retailers, the coronavirus could cut into earnings for many consumer-facing companies if the virus that’s infected more than 82,000 people worldwide escalates in America and forces consumers to stay home.

Yet bottom lines could go in the opposite direction for companies with food delivery built into their business model, according to market experts who point out everyone still has to eat — even if they do not leave their house.

More Americans are using the internet for their grocery shopping and meal plans, and that trend was going strong before coronavirus concerns, said David Portalatin, vice president, food industry advisor, for The NPD Group, a market research firm.

People have all sorts of ways to bring food into their homes, ranging from an order on Amazon AMZN, -0.11%   Prime, Walmart WMT, -2.46%   Grocery, Uber Eats, Fresh Direct or Stop & Shop’s Peapod, to name a few.

In the past 30 days, 21% of U.S. consumers ordered perishable, edible groceries online, Portalatin said. That’s up from 18% at the same point last year.

“It is reasonable to conclude that if we were to have a serious outbreak here, it would be an acceleration of the previous trend,” Portalatin said.

There’s some evidence that increased reliance on food delivery is happening in China, where there had been nearly 78,497 coronavirus infections and 2,744 deaths as of Thursday. There was a 20% growth in spending on food deliveries in China during January, compared to a year ago, NPD data said.

Customers in China are requesting ‘non-contact’ food delivery

Requests for “non-contact” food delivery have reportedly been surging in China since the coronavirus outbreak. That can mean leaving the food at a specified site, like a front desk or in front of a building. Meituan — a food order and delivery platform in China — reportedly had 80% of all orders between late January and early February request no contact, Business Insider reported. Meituan food couriers even have their body temperature on display in an effort to reassure customers they are healthy, according to the Financial Times.

With health officials warning that Americans should prepare for the possible spread of the coronavirus, some observers foresee increased demand for food delivery in the U.S. In an investment note on GrubHub, the online food ordering platform, D.A. Davidson analyst Tom Forte said, “concerns related to the outbreak may motivate consumers to stay home and order in, which could provide a boost to short-term revenues.”

The rising number of confirmed coronavirus infections in America “increases the potential for consumers to stay home and order in, which could be beneficial to Grubhub’s sales in the March quarter and, even, June quarter depending on the duration of the outbreak and extent of the impact on consumer’s behavior,” wrote Forte, a consumer technology analyst, in Tuesday’s note.

(GrubHub GRUB, +4.18%   did not respond to a request for comment. Its shares were down Friday almost 3% from the start of the year, while the Dow Jones Industrial Average DJIA, -1.39%   was down nearly 8% in that time and the S&P 500 SPX, -0.82%  was down almost 6%. The stock market endured a massive sell-off this week amid concerns about the coronavirus’ severity and reach.)

As of Feb. 27, there were 60 confirmed coronavirus infections in America and no deaths.

‘Social distancing’ could mean more time at home

If the coronavirus outbreak intensifies in America, online orders might be a matter of necessity, not convenience.

Earlier this week, Dr. Nancy Messonnier, director of the CDC’s Center for the National Center for Immunization and Respiratory Diseases, told reporters “we expect we will see community spread in this country. It’s not so much a question of if this will happen anymore but rather more a question of exactly when this will happen and how many people in this country will have severe illness.” (“Community spread” refers to infections in people who have not traveled to areas where the virus is widespread or come in contact with people who have traveled to those places.)

‘Right now, every company that is handling food, that is delivering food, right now go over these things with your workers. Don’t wait until you have a bunch of people contaminated.’

— Dr. Elizabeth Bihn, executive director at Cornell University’s Institute for Food Safety

“Social distancing” is one way to address the spread of the virus, including tactics like school closures, cancelled business meetings and telecommuting to reduce the risk of exposure, Messonnier said. She acknowledged the possibility of closing school and missing work “may seem overwhelming. …But these are things that people need to start thinking about now.”

A worsening coronavirus outbreak in America could push more people into online grocery shopping, said Neil Stern, senior partner at McMillanDoolittle, a Chicago, Ill.-based retail strategy company.

One of Stern’s clients is a South Korean retail store he declined to identify. The country has a much more developed online grocery shopping market — and it also had 1,766 cases and 13 deaths from the coronavirus as of Friday.

The South Korean retailer’s online business has been up triple digits in the past month, especially in the past two weeks, Stern said. At the same time, in-store business has been flat or slightly up. “What they are experiencing is a lot of people going to the stores and hoarding,” Stern said.

He said the company’s workers wear “pretty heavy duty” face protection on the job at this point. And its existing way of doing business could serve it well during the outbreak: Even before the coronavirus’ emergence, drivers would text customers when orders are on the way and then send time-stamped pictures of packages at their door.

Food delivery companies are following public-health officials’ recommendations

If food delivery companies have more demand for services, they’ll also have a greater need to maintain a healthy workforce.

Though Chinese delivery companies may be resorting to “non-contact” deliveries and couriers carrying information about their temperature, people making and delivering food in America should focus first on basic health and hygiene rules, said Dr. Elizabeth Bihn, executive director at Cornell University’s Institute for Food Safety.

That means washing hands correctly, and taking off work if you’re feeling sick, she said. It also includes not smoking on the job or eating food before delivering food, Bihn said. (In both instances, a worker’s hand can touch their mouth, she noted.)

“Right now, every company that is handling food, that is delivering food, right now go over these things with your workers,” she advised. “Don’t wait until you have a bunch of people contaminated.”

Bihn emphasized she has no expertise on the coronavirus, but she knows the fundamentals that are “always relevant for people handling food.” “Before you go down the road of all these other things we might have to contemplate, start with the basics that people tend to overlook,” she added.

Companies whose workers come into close contact with customers told MarketWatch they are keeping close tabs on the coronavirus’ spread and have been in touch with public health officials.

“Uber UBER, +4.38% is not a healthcare expert and follows the guidance of local Public Health Organizations. We are monitoring the situation and take action based on their recommendations,” an Uber spokeswoman said.

“We are watching this situation closely with a focus on the safety of our teams and ensuring we can meet customer promises. We are closely following local and international health authority guidance as this situation progresses,” an Amazon spokeswoman said.

Walmart, Fresh Direct and Stop & Shop ADRNY, -2.86%   did not immediately respond to a request for comment.

More from MarketWatch

Retirement Weekly: You should have a purpose in retirement, too

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People spend many hours planning for retirement, fretting over whether to put money into a 401(k) or a Roth IRA, debating whether to buy an annuity or calculating a payout strategy to make sure they don’t run out of money.

But they probably spend far less time thinking about what they want to accomplish in retirement. Yes, accomplish. To many people retirement is the absence of purpose and goals. With their career over and the kids presumably gone (if they had kids), it’s a time to relax and enjoy life free of pressure and responsibility.

Nothing wrong with that. But retirement is changing. People are living and working longer, either full or part time (if their employers let them). The old model of ending your career and then sitting in a hammock or playing golf for the rest of your life doesn’t work for a lot of people anymore.

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Retirement Weekly: Women need to play to their strengths when it comes to retirement planning

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There’s plenty of information out there when it comes to how people are struggling to save for retirement, and not surprisingly much of it highlights all the areas that need improvement. People aren’t saving enough, there’s too much personal debt, juggling competing financial priorities is exhausting…the list goes on.

Of course, in any area of life, from our relationships and careers to our physical and financial health, being honest about where we are falling short is an important part of how we take steps to improve. But focusing only on what’s not working can mean some of our greatest strengths get overshadowed.

This holds especially true when it comes to women and saving for retirement.

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Retirement Weekly: News and analysis for those planning for or living in retirement

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From MarketWatch:

Coronavirus fears are clobbering the stock market — is it doing the same to your retirement?: Concerns of the spreading of the disease are causing the markets to experience extreme volatility, but that doesn’t mean you should start changing your investment portfolios just yet.

How valuable is your 401(k)? These numbers will tell you: The Secure Act wants retirement savers to know how much their retirement plans are actually worth — this is how you can tell.

FIRE after 50? Yes, you can. Here’s 4 misconceptions about retiring early: The early retirement movement isn’t just for people in their 30s and 40s, and other facts you should know.

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Bitfinex and OKEx Hit by DDoS Attacks: Here are the Key Details

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Bitfinex

Crypto exchanges have made it easier for millions of people to trade in cryptos, but they have also been found to be vulnerable to attacks, and today, two crypto exchanges, Bitfinex and OKEx, reported Distributed Denial-of-Service (DDoS) attacks.

OKEx stated that the exchange suffered the attack last night, but none of its users were actually affected by it. Bitfinex appears to have been the subject of a similar attack today, and the extent of the attack is not yet known. The company took to Twitter and stated that the matter is currently being investigated.


Key Details

It goes without saying that this is not the first time that exchanges have been subjected to such attacks. A spokesperson for OKEx stated that that the company’s servers were flooded with internet traffic in a malicious attempt to disrupt its functioning. The Chief Executive Officer of the company, Jay Hao, stated that the large-scale attack was orchestrated by competitors.

Users of Bitfinex will be waiting to hear about the source of the DDoS attack and whether any accounts have been affected by the attack or not.

Bitfinex stated that normal activity has been resumed on the exchange after it put in place a “stricter protection level.” The Chief Technology Officer of the exchange, Paulo Ardoini, stated that although the exchange has advanced DDoS prevention mechanisms in place, the latest attack came about from a large number of different IP addresses. This means the system was crippled.

>> Coronavirus Outbreak Tests Bitcoin Safe Haven Status

OKEx spokespersons stated that the company has around-the-clock monitoring and technical support in place, which is why the company was able to repel the attack within a short span of time. While this was a bit of a setback for the exchanges, crypto enthusiasts would hope that OKEx and Bitfinex are not afflicted by it in the future.

Featured image: DepositPhotos © tashatuvango

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Top Ten: Weekend reads: Will the Federal Reserve rescue the stock market from coronavirus?

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As the stock market plunges amid the spreading coronavirus update, should the Federal Reserve’s response be to cut short-term interest rates? President Trump says yes. Economists say it won’t help when the problem is disruption to the supply chain, not weak demand. Rex Nutting covers both sides of the argument.

Coronavirus updates

Just about all MarketWatch readers want to read, it seems, is the latest on the coronavirus and its effect on financial markets and the economy. Click here for the latest coverage.

Here’s a summary of what the 30 companies in the Dow Jones Industrial Average DJIA, -2.03%  and other large U.S. companies have said about the coronavirus’s effect.

What if there is a major outbreak of the coronavirus in the U.S.?

Cirara Linnane and Tonya Garcia consider the potential damage to U.S. consumers and the companies they do business with.

And could the coronavirus end globalization?

What’s really happening in China?

China gets back to work — sort of. But here’s why the situation may be much worse than what has been reported.

What about the stock market?

First, there’s this sobering perspective: The coronavirus isn’t the stock market’s only problem.

If you hare wondering when to begin buying, Mark Arbeter explained how it looks from a chart-watcher’s perspective. And Mark Hulbert described a technical development that could set up a quick rebound for U.S. stocks.

Best new ideas in health care

MarketWatch peers into new developments in health care: the technologies that will change health care the most over the next decade, how medical schools are adapting because of climate change, how the U.S. can improve the health of seniors and toddlers at the same time and more.

Hope for a much longer life

Technological research promises to attack the problem of aging from many different angles, according to Peter Diamandis and Steven Kotler, co-authors of “The Future is Faster Than You Think.”

What to tell the kids about family money?

Quentin Fottrell — MarketWatch’s Moneyist — helps a woman who inherited a trust fund and who worries about when she should tell her children about it.

How to make a quick $3,500

Move your brokerage account and claim a fat sign-up bonus — but there’s a catch.

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Want more from MarketWatch? Check out our Personal Finance Daily or other newsletters, and get the latest news, personal finance and investing advice.

Commodities Corner: There’s a simple reason that gold is falling along with coronavirus-afflicted global stocks

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Gold prices have been acting a bit strange lately, with the haven metal plunging in the face of a dive in global stock markets hit by the spread of COVID-19 and its impact on the economy in China and around the world.

The precious metal usually finds support as a drop in the stock market tends to lift the haven appeal of gold, with benchmark stock indexes in the U.S., Europe, Asia, Canada, the Middle East and Latin America suffering losses for the week.

This time around, however, given the steep stock-market declines, gold has become the asset of choice among investors to generate cash.

“Investors are selling anything with a bid and running for cover, and that includes typical hedges like gold,” said Brien Lundin, editor of Gold Newsletter.

“We saw similar behavior during the 2008 financial crisis, however, and once investors understood and appreciated the scope of central bank stimulus coming down the pike, they began buying gold,” he said. “The price more than doubled from the lows thereafter.”

On Friday, the most-active April gold futures contract GCJ20, -3.85%  traded at $1,585.80 an ounce, down $56.70, or 3.5%, during the session. It was looking at a weekly loss of 3.8%, and lost a grip on a gain for the month.

At one point, prices fell by as much as 4.3% from Thursday’s settlement to an intraday low of $1,572.30. A daily percentage loss of that size for a most-active contract would have been the largest since June of 2013, according to FactSet data.

In the U.S., the Dow Jones Industrial Average DJIA, -2.04%, S&P 500 SPX, -1.57% and Nasdaq Composite Index COMP, -0.88%  closed Thursday in correction territory. They traded sharply lower again on Friday.

Read: Stocks get slammed as investors fear a ‘supply shock’ that central bankers can’t fix

“This was an extraordinary week and is capitulating into panic selling into many markets including precious metals,” Peter Spina, president and chief executive officer at GoldSeek.com, told MarketWatch. “The gold market has had heavy fund holdings grow heavily over the last several months’ run-up in gold that now, with the general markets selling off, some of that excessive positioning is being shaken out.”

Likely adding to pressure on gold prices: “Physical transaction in China and India are typically conducted face to face, and we anticipate that these transactions are going to plummet as the coronavirus crisis plays out,” said Peter Grant, vice president of precious metals at Zaner Metals, adding that these two countries account for about 1,000 metric tons of demand annually.

Meanwhile, silver prices have taken a hit along with gold, with prices for the May contract SIK20, -6.63% down $1, or 5.6%, at $16.735 an ounce in Friday dealings, poised for a weekly loss of nearly 10%. That would be the largest weekly percentage decline for a most-active contract since April 2013, according to FactSet data.

“Silver is in even worse shape due to its industrial attribution and slack in industrial demand and fears of greater demand loss as the virus fears hit commodity and energy markets,” said Spina. The gold-to-silver ratio is “slightly exceeding last year’s highs above 95,” he said, highlighting the extreme moves for both metals. On Friday, about 95 ounces of silver would buy one ounce of gold.

Taking a look at the bigger picture surrounding gold’s volatile moves, Lundin said “Gold’s being buffeted by waves of selling, likely from equity traders getting market calls and needing to raise cash, followed by waves of buying from investors who see a flood of central bank stimulus on the way.”

Read: The Fed can’t stop coronavirus from slamming the economy, but it could ease the pain

Lundin expects to see “much higher” gold prices in the weeks and month ahead. “The stimulus programs coming up will have to include not only rate cuts, but more [quantitative easing] than the last go around, plus fiscal measures like massive government spending programs,” he said. Precious metals like gold tend to attract buyers in a low interest-rate climate.

“For now, though, everyone’s running for cover,” said Lundin.

Mark Hulbert: What is a retiree’s most important investment decision?

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On what should you spend more time in devising your retirement portfolio:

Asset allocation (how much to allocate in the first place to equities, bonds, and so forth) or security selection (which individual mutual funds or ETFs to purchase once you’ve decided how much to allocate to a particular asset class)?

The answer from many investors and financial planners is the latter, on the theory that the factors that affect the former (age, risk tolerance, etc.) don’t change very often or by much when they do. Security selection, in the contrast, is where the greatest value gets added.

A new study, forthcoming in the academic journal Critical Finance Review, should cause you to reconsider. The study is entitled “Carhart (1997) Mutual Fund Performance Persistence Disappears Out of Sample.” Its authors are James Choi, a professor of finance at Yale University, and Kevin Zhao, a Ph.D. candidate at that institution. (Full disclosure: Prof. Choi was an intern in my office in 1996.)

The “Carhart (1997)” referred to in the title is a seminal study conducted in the 1990s by Mark Carhart, entitled “On Persistence in Mutual Fund Performance.” Carhart at the time was a finance professor at the University of Southern California; he subsequently became co-chief investment officer at the Quantitative Investment Strategies Group at Goldman Sachs Asset Management, and after that, chief investment officer at Kepos Capital. Carhart found that the funds with the best returns in the previous calendar year produced better returns in the subsequent year than the previous year’s worst performers.

To be sure, Carhart did not attribute this persistence to superior ability on the part of mutual fund managers. He argued that it was instead caused by the tendency of one year’s best-performing stocks to be above-average performers in the next year as well. This nuance was lost on many financial planners, however, who cared less about why “hot hands” persist in the mutual fund arena and more on the mere fact that they exist.

Choi’s and Zhao’s new research calls into question even this un-nuanced interpretation of Carhart’s findings. They found that almost all of the statistical significance in Carhart’s study derives from data up through the late 1970s. Over the nearly four decades since then, in contrast, there has not been a statistically significant difference in the risk-adjusted performances of the previous year’s top performing mutual funds and the previous year’s worst.

To put that another way, the historical data suggesting year-to-year persistence in mutual fund rankings is largely an artifact of the period prior to the 1980s.

This is illustrated in the accompanying chart. It shows the difference in the trailing 10-year returns of two hypothetical portfolios: The first contained the 10% of U.S. equity mutual funds with the best returns in the prior calendar year, while the second contained the decile of worst funds. The blue shading shows those differences that are significant at the 95% confidence level that statisticians often use when determining if a result is more than just random luck.

Notice that, after the 1970s, there have been just a handful of years for which there is statistical significance for the trailing 10-year difference between the top and bottom decile portfolios. And since the turn of the century there has been no ten-year period with such significance. Furthermore, when the researchers expanded their focus to the entire period since 1980, rather than to ten-year intervals along the way, they found no statistically significant difference.

This late-1970s inflexion point is decades earlier than what many analysts and investors had previously assumed—that a strategy of betting on the previous year’s winners had only stopped working in the last decade. To the extent that had been the case, one could plausibly argue that this only a temporary state of affairs.

But not if the approach hasn’t worked for four decades.

There are several investment implications of this new research. The most important is that, because there is far less performance persistence in the mutual fund arena than previously thought, energies spent on selecting a mutual fund are likely a waste of time. Once you have decided how much to allocate to a given asset class, then you should invest that allocation in a low-cost index fund.

This investment implication doesn’t mean that asset allocation now all of a sudden is more important than it was before. But, relative to security selection, which is now seen to be little more than a fool’s errand, asset allocation will be seen by many to become more important.

Some of my clients are disappointed when they hear advice like this, since it means they need to give up the dream of beating the market. But I like to reframe the issue differently. Results of study such as this one liberate us from poring over the year-to-year performance rankings—enabling us instead to focus on what’s really important.

Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. Hulbert can be reached at mark@hulbertratings.com.

Outside the Box: 5 ways investors can stay calm as coronavirus fears worry markets

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After more than a decade of tremendous gains in the stock market SPX, -2.00%, just about everybody in the financial advising business knew that a correction of some sort was due.

It was anybody’s guess as to when or why. The news of the coronavirus spreading outside China’s Hubei province has turned out to be that catalyst. Stocks, unsurprisingly, have sold off.

Read Market Snapshot

The coronavirus is deadly and the headlines from China about frontline medical workers becoming victims are heartbreaking. Nevertheless, the job of a prudent investment manager is not to speculate about short-term events.

Rather, the job of advisers is to help clients by making sure in advance that their investments are properly balanced between stocks and bonds. If they are, sharp turns in the market tend to play out without triggering an unnecessary and damaging emotional response.

Read: Coronavirus fears are clobbering the stock market — is it doing the same to your retirement?

It’s that emotional reaction that can easily lead a client to bail on perfectly good investments. Yes, some might feel a little better by selling with the crowd, but inevitably they come to regret letting bad news chase them out of good stocks.

Do you think the trustees of the world’s great endowments, the people running massive public retirement funds in big states such as California and other experienced professional investors are panicking and selling because of the coronavirus?

No way. Many of them, in fact, likely are buying stocks as they fall. They understand that news events, what traders call “headline risk,” are short-term factors that distort true market valuations.

I realize it’s hard to think long term like a pension fund administrator. That’s why the steady hand of a good financial adviser can be helpful. Here are a few thoughts that I hope calm you enough to avoid making an emotional decision with your portfolio.

Stocks have a way of shrugging off even bad news

First, how are you invested? Do you own actively managed mutual funds or individual stocks? Are you following a recent investment fad? Hopefully not. Owning low-cost index funds that reflect the entire global economy suggests you’ll be more than fine.

The global economy has always recovered from calamities such as the tech bubble, the Great Recession and so on. In any five-year rolling average period since 1950, a portfolio of stocks and bonds has seen positive returns.

Specifically, J.P. Morgan JPM, -4.80%  data show that stocks fell by 13.8% on average each year since 1980, yet they ended those years with gains three-quarters of the time. Going back to 1950, a 60/40 stock-to-bond portfolio returned 8.9% on average through 2019. It’s hard to argue with success.

When do you need the money?

If you are 50 and worried about your IRA or 401(k), remember that you can’t withdraw money without paying taxes and a penalty until you are nearly 60. Do you really think that in 10 years your IRA will be worth less than it is today? Invested properly, your money at a 7.2% compounding return will double over those 10 years. At a 6% compounding return it will double when you reach 62.

Unless you’re retired and need income now, cash is an automatic loser as investment. Not only is inflation eating away at your money, it’s virtually impossible for cash to compound in a bank account paying nearly nothing in interest.

Are you retired? How much do you use of your portfolio for cash flow?

If you are living off your retirement money now, what percentage of your entire portfolio are you spending each year? If it’s between 3% and 4%, it’s likely that the dividends you collect will cover your financial needs. You’ll be fine as we ride this out.

Forget your gut instincts

If you still believe your gut instincts will help you avoid the short-term pain of a market decline, remember this: To win you have to get two decisions right, when precisely to get out and when precisely to get back in. If you get one of these wrong it likely will cost you dearly down the road.

Most people who choose to get out rarely get back in on time and consequently they miss big moves up. Princeton professor Burt Malkiel, a member of the investment committee of my firm, puts it this way: “I’ve been around this business for 50 years and I’ve never known anyone who could time the market, and I’ve never known anyone who knows anyone who could time the market. You can’t do it. It’s very dangerous.”

Additionally, if you have your money in a taxable account, selling will trigger long-term unrealized gains, so you’ll take a tax hit no matter what.

The next best thing to a ‘magic genie’

We all wish that we had a genie that could predict the markets. Many folks you see on the financial news channels certainly claim genie-like abilities. But the truth is no one can.

In the absence of that genie, we believe in rebalancing a portfolio is the next best thing. Your investments already churn cash back into your accounts all year long in the form of bond interest payments and dividends. Typically that cash flow is reinvested best by reinvesting automatically at a low cost.

Over time, of course, your preferred ratio of stocks to bonds can get out of whack. Rebalancing forces you to sell high and buy low systematically, no matter what’s happening in the headlines. It’s the only real way to capture gains year in and year out without having to bet which way the market will go next.

If you’re due to rebalance soon, go ahead and keep that virtuous cycle going. Ignore the headlines meanwhile. Too often, they will only do your retirement irreparable harm.

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