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Throughout the history of stock markets, bear markets have occurred numerous times. A bear market is typically defined when markets have declined by 20% from their near-term highs. There have been eight bear markets between 1926 and 2017. The S&P 500 has seen declines ranging from 21.80% to 83.4% during these periods.

The bear market that most current investors recall is the time period between 2007 – 2009, when the S&P 500 was down 50.90%. This is also the time period often referred to as the “Great Recession”.

Currently, the major indices have sold off and have officially entered a bear market.  As of this writing (3/19/2020), the S&P 500 is down 25.77%, Dow Jones Industrial Average 30.27%, and the NASDAQ 22.10%.

Our current bear market’s immediate cause is due to the Coronavirus (COVID-19) pandemic and a price war between Russia and Saudi Arabia over oil production. The latter is why gas prices are dropping at your local station.

Even though history shows that we have experienced similar volatility in the markets throughout history, each time investors find themselves asking: What should I do?

While it’s important to note that each individual has unique circumstances, I’d like to attempt to broadly address some common concerns.

Should I sell my stocks?

Probably Not. As history demonstrates, when markets sold off drastically, these same markets rebounded to new highs. Prior to the recent declines, the United States economy was very strong, and the markets continued to reach new highs. Unfortunately, human emotions tend to react counter to a prudent investment philosophy.

When investing, prudence tells us to always evaluate one’s time horizon, cash needs, and risk tolerance to determine a proper asset allocation for his/her investments. This is why it’s always recommended that you seek the guidance of a professional financial consultant to help you navigate those decisions.

With that said, the onset of a bear market is usually the worst time to make changes in your investments. During these times, people tend to make short-term, emotionally driven decisions with their investment portfolios versus methodical and disciplined decisions. History proves that no one can predict when a market bottom will occur just as no one can predict the high. The key is to be methodical, disciplined, and stay the course with your investment plan you already had in place.

At Trust Company of North Carolina, we work actively with clients to ensure they have at least 2 – 3 years of cash flow needs allocated to fixed income investments. This allows clients to stay the course during times of market declines and still meet cash needs. If your investment plan does not include a conservative allocation to meet your current needs, we suggest you work with a financial consultant to review your current situation.

Should I stop contributing to my 401K?

No. Assuming you have adequate cash flow to meet your current financial obligations, you should continue to contribute to your retirement. During down markets, you’re able to contribute and invest your funds when stocks are “on sale”. Unfortunately, people tend to do the opposite and then only start back once the market has rebounded.

Should I sell my stocks in my retirement account?

If you are very close to retirement and you will need to draw your retirement funds in the near future, we encourage you seek professional guidance. But even in your retirement years you will need to grow your funds to sustain you through retirement. This growth is typically obtained from stocks since historically stocks offer higher long-term growth versus bonds and cash.

If your time horizon is several years, or even a decade or longer, history tells us that those who sell during bear markets are punished over the long-term, while those that stay the course or buy are rewarded.

We often hear people speak of how they lost money during the Great Recession. When we probe deeper, we find they sold out of their investments, typically at or near the bottom of the market. Then unfortunately, they did not reinvest until well after the market recovery. By doing so, they missed a large part of the market rebound. Their individual actions created their long-term loss.

In Summary

These are, no doubt, very stressful times. Historically, Americans and the US economy have seen numerous times where things seemed to be the darkest of times. This country has experienced world wars, a great depression, terrorist attacks, and a major financial crisis. At the moment we are dealing with a health crisis that will have very negative economic consequences. While no one can predict the future, we can draw strength from our past.

Our citizens and our county at large have always rallied to overcome adversity and by doing so our economy and markets have followed suit. During this time, we must stay calm and stay the course. Have faith in your financial plans and seek professional guidance to help you navigate your unique circumstances. We welcome the opportunity to actively work with you to help you navigate these turbulent waters.

                                                                         – Tim Britt
                                                                            Chief Wealth Management Officer

Historical information obtained through Morningstar and Investopedia.

The information and opinions expressed in this publication are not intended to constitute a recommendation to buy or sell any security or to offer advisory services by North Carolina Trust Company.

This material was prepared solely for information purposes and is not a solicitation or an offer to participate in any trading strategy, and should not be relied on for accounting, tax or legal advice.

Products are not guaranteed by Bank and not FDIC insured. May lose value.

FUQUAY-VARINA, North Carolina (May 30, 2019) – Fidelity Bank is pleased to announce Samantha Whitley has joined its Trust Company of North Carolina team as Wealth Administration Specialist. In her new position, Mrs. Whitley is responsible for daily account administrative duties as well as supporting business development and investment management. Her office is located at the Trust Company of North Carolina headquarters in Cary on 100 West Chatham Street.

Samantha is a recent graduate of Campbell University with a Bachelor’s of Business Administration in Trust and Wealth Management and a Masters of Business Administration with a focus in Financial Services. Prior to joining Trust Company of North Carolina, she interned with BB&T Wealth and City National Bank in their Trust and Estate department. She currently resides in Farmville, NC with her husband, Bailey Whitley.

Trust Company of North Carolina, Fidelity Bank’s trust and wealth management division, was established in February 2015. They have five associates and serve the entire Fidelity Bank Footprint.

Fidelity Bank is a full-service financial institution with assets of approximately $1.9 billion headquartered in Fuquay-Varina, North Carolina. The Bank owns and operates 56 branches throughout North Carolina and Virginia; and was awarded a 5-star (superior) rating by BauerFinancial. For more information, please visit www.fidelitybanknc.com.

FUQUAY-VARINA, North Carolina (May 10, 2019) – Fidelity Bank is pleased to announce Larry Allen has joined its Trust Company of North Carolina team as Senior Vice President and Senior Investment Strategist. In his new position, Mr. Allen will manage the investment functions for Trust Company of North Carolina and serve as the individual portfolio manager for customer relationships. His office is located at the Trust Company of North Carolina headquarters in Cary on 100 West Chatham Street.

Larry has over 25 years of experience in the investment industry. Prior to joining Trust Company of North Carolina, he worked as a Senior Investment Advisor at PNC Wealth Management. Mr. Allen graduated from Campbell University with a Bachelor’s of Business Administration in Trust and Investment Management, a Master’s Degree in Finance, and holds a Certified Financial Planner (CFP) designation. He currently resides in Raleigh.

Trust Company of North Carolina, Fidelity Bank’s trust and wealth management division, was established in February 2015. They have five associates and serve the entire Fidelity Bank Footprint.

Fidelity Bank is a full-service financial institution with assets of approximately $1.9 billion headquartered in Fuquay-Varina, North Carolina. The Bank owns and operates 56 branches throughout North Carolina and Virginia; and was awarded a 5-star (superior) rating by BauerFinancial. For more information, please visit www.fidelitybanknc.com.

FUQUAY-VARINA, North Carolina (May 10, 2019) – Fidelity Bank is pleased to announce Landon Dascombe has joined its Trust Company of North Carolina team as Assistant Vice President and Fiduciary Manager. In his new position, Mr. Dascombe is responsible for daily oversight of all operations, administration, client service, sales administration, and compliance. His office is located at the Trust Company of North Carolina headquarters in Cary on 100 West Chatham Street.

Landon has over five years of experience in wealth management. Prior to joining Trust Company of North Carolina, he worked as a Client Consultant and Trust Administrator for Abbot Downing, a subsidiary of Wells Fargo. Landon graduated from Campbell University with a Bachelor’s of Business Administration in Trust and Investment Management with a minor in Financial Planning and a Master’s Degree in Business Administration. He also holds the Certified Trust and Financial Advisor designation (CTFA). He currently resides in Cary.

Trust Company of North Carolina, Fidelity Bank’s trust and wealth management division, was established in February 2015. They have five associates and serve the entire Fidelity Bank Footprint.

Fidelity Bank is a full-service financial institution with assets of approximately $1.9 billion headquartered in Fuquay-Varina, North Carolina. The Bank owns and operates 56 branches throughout North Carolina and Virginia; and was awarded a 5-star (superior) rating by BauerFinancial. For more information, please visit www.fidelitybanknc.com.