Less than two weeks after the outbreak was declared a pandemic, COVID-19 (coronavirus) continues to cause great volatility in the financial markets. No investment has been immune to this decline and there has been no safe place to hide in the financial markets during the massive sell off.
To understand the financial impact of the coronavirus, it is important to look at just a few of the statistics concerning the financial markets:
- Stocks just finished their worst week since the Great Financial Recession of 2008, closing down more than 15% over the last week alone.
- At the closing of 9 out of the last 10 trading days, the S&P 500 moved more than 4%, either up or down, from the day before. Previously, the index had only moved six days in a row more than 4% and that occurred in 1929.
- It took 790 trading days for the Dow to go from 20,000 to over 29,000. It took only 43 trading days to lose that much and go below 20,000 again.
- The Dow ended the week at 19,173. Prior to this pandemic, the Dow had not been below 20,000 since February 2017.
- On January 19, 2017, the day before President Trump took office, the Dow closed at 19,804.
- The 10-year Treasury note, while recovering some in the last few days, traded as low as .40% within the last couple of weeks. The 30-year Treasury note traded below 1% in the same time period, both reaching all-time lows. As of the close of business on Friday, March 20, the 10-year Treasury was at .94% and the 30-year Treasury was at 1.55%. Simply stated, that means that if you bought a Treasury note from the government for 10 years, they would pay you less than 1% per year for the next 10 years, or 1.55% per year for the next 30 years.
- U.S. produced oil declined almost 30% last week and was trading at just above $20 a barrel by the end of the week.
- Even traditionally safe assets, such as gold, traded down last week.
Preliminary report shows that jobless claims may hit 2 million, an unprecedented level, when they are reported later this week. However, the pain from the market downturn is probably not over.
So, during this “black swan” event, what should investors be doing during these turbulent times?
Over the past few weeks, I have consistently given the same advice:
- Breathe – take a deep breath and do not act out of fear. Most decisions made out of fear are unfounded.
- Locking In Losses – remember that if you move out of the stock market while it is down, you are locking in your losses. If you do not sell, you only have a paper loss. However, if you move out of the market, you turn those paper losses into realized losses. So, be careful about your decisions regarding asset allocations.
- Be prepared for less income in the coming weeks – It is expected that revenue into local churches will drop at least 20% in the next few weeks. That number could greatly increase if the coronavirus pandemic continues for longer than expected. Therefore, it is critical that our participants be aware that they may have to survive on less for the next few weeks and even months. An emergency account is more critical now than ever.
- Be proactive with your creditors, especially your mortgage company – At the moment that you see your income is going to be reduced, you should be in conversation with your creditors about pending payments. Many mortgage companies are already offering interest-only payments during this crisis. You should contact those creditors immediately to discuss what options are available.
- Taxes are delayed – On March 20, the U.S. Treasury Department announced that they were delaying the requirement to file taxes from April 15 until July 15. Therefore, you do not have to file your taxes until July 15, nor do you have to pay any taxes owed until July 15. Please note that this delay does not apply to minister’s quarterly taxes that are due for the first quarter on April 15.
Benefits Board/Church Loan Fund’s Actions
Understanding the times that we are in and that we are facing over the next several months, the Church of God Benefits Board, Inc. and the Church Loan Fund, Inc. are also taking specific steps to assist our participants during these turbulent times:
- Asset allocation changes are now being allowed on a daily basis, rather than weekly as per our normal policy.
- Each church loan is being evaluated on a case-by-case basis for relief.
- The Church of God Benefits Board and the Church Loan Fund have implemented their business continuity plans. While currently we are still operating in our corporate offices and following normal business hours, we are prepared to work remotely should health and governmental officials dictate that such occur. All operations will continue as normal, even if remote work were to be required.
While we cannot stop the gyrations in the financial market from occurring, our trained and professional staff remain available to answer any questions that you may have concerning your retirement account or your church loan. Do not hesitate to call on us if we can be of assistance.