We have seen a lot of volatility in the markets in 2020, thanks in part to the impact of the COVID-19 pandemic.
From March through May of 2020, more than 40 million Americans (roughly one in four workers) filed for unemployment benefits. The US Federal Reserve (Fed) cut interest rates to zero. And oil prices plummeted. All of this impacted a variety of securities. But do events such as these always affect your portfolio? Not necessarily.
As an example, let’s look at oil prices. They tumbled because of the dynamics between oil producers Russia and Saudi Arabia. Russia refused to cut oil production in order to keep prices for oil at moderate levels. This conflict resulted in a steep drop in oil prices (around 30%) in the first few weeks of March 2020.
As another example, consider central banks’ actions earlier this year. When COVID-19 shuttered the US (and global) economy, central banks took bold emergency actions to support the economy, cutting their target interest rates, among other things.
You could be affected by these situations, regardless of whether you hold oil stocks or international stocks because fear is contagious. What happens in one market may affect another. But it’s important to put such situations in perspective. For example, there are many segments of the energy sector (such as utilities) that are not directly impacted by volatility in oil prices. And some energy companies (such as exploration and production companies) are used to fluctuations in oil prices and prudently manage their liquidity to stay afloat within lower-price environments.
If you’re worried about market volatility affecting your portfolio, please let me know if I can help you navigate market fluctuations and make decisions that are best for you. I’m here to help, and I am just a phone call or email away.