Protecting Your Investments Against COVID-19

By Scott Brady, Wealth Management Advisor

The Stock Market

What a year it has been! The big news in February was yet another all-time high for stocks, and then a 36% drop in just four short weeks. The sharpest drop in history. The story for April was a recovery of 32% — not quite a record, but close. We now sit just 5% or so from those highs we hit a few months ago. Feels like years. What comes next is anybody’s guess — maybe back up to record highs again. But it seems like a good guess that we will see lots of volatility in both directions, as we deal with the impact of shutting down an entire economy and then trying to start it back up again.

Crashes and Recoveries Take Time

Many of our members avoid the stock market altogether, preferring the safety of annuities and CDs over the risk of stocks and bonds. But for those that invest in stocks and mutual funds — perhaps through a 401(k) plan — many have come to believe and expect that every market crash will eventually be followed by a recovery; that the long-term trend of stocks is always up. Just look at history and you will see how compelling the argument is in favor of owning stocks over the long-term. But long-term means years, not months. The last big crash was 2008. That time, the comeback took five years. The time before that, about seven years. The time before that, more than sixteen. When the market famously crashed in 1929, the market went on to lose 89% of its value before fully recovering — in 1954! We are only a few months into this crisis. Expect it to take a while to play out.

Maintaining Your Purchasing Power

It has been a long time — about forty years — since inflation was a thing. Inflation is a loss of purchasing power as a government increases the money supply. Many people live on a fixed income and would experience a loss of purchasing power if, or when, inflation ever takes hold. Over the next decade or so, inflation looks like it could again become the thing it once was, as our government circulates trillions upon trillions of dollars that didn’t exist before and will eventually have to be paid back. The world has changed, and investment strategies need to adapt. What worked so well for many investors for such a long time during a period defined by low inflation, lower interest rates and high stock prices, may not work quite so well in this new era that so far looks to be one in which both the supply of money, as well as the cost of living as a result, are growing to infinity.

How We Can Help

Every investor has a unique situation and different investing needs. Our financial advisors are experienced and knowledgeable professionals who can help determine what combination of stocks, bonds, annuities, mutual funds, ETFs, CDs, precious metals, etc. is right for you. We can help you rollover your 401(k), set up a brokerage account, establish a Roth IRA, manage an inheritance or reinvest a pension buyout. Contact Scott Brady of our Wealth Management Group at 248.443.4234 to schedule an appointment to discuss your needs and learn how Michigan First can help you build and protect your wealth.

 

Advisory Services offered through Capital Asset Advisory Services (CAAS), a Registered Investment Advisor. The investment and insurance products recommended, offered or sold through Capital Asset Advisory Services and its representatives:

  • Are not Credit Union shares or deposits,
  • Are not federally-insured by the National Credit Union Share Insurance Fund,
  • Are not obligations of or guaranteed by the Credit Union,
  • Involve investment risks, including possible loss of principal.

Capital Asset Advisory Services is not affiliated with Michigan First Credit Union or Michigan First Wealth Management Group.

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