Webinar: The Markets Have Been Rocked! Where are the Headed?
The COVID-19 pandemic has created massive uncertainties and sharp price movements in the markets.
On April 28, experts in the financial sector shared their insights and suggestions on investing and personal finance as we navigate the “new normal.”
Moderated by Reena Aggarwal, Robert E. McDonough Professor of Business Administration, professor of finance, and director of the Center for Financial Markets and Policy, the panel included Michael J. Mauboussin, Head of Conciliant Research at Counterpoint Global, Author of three books, and Adjunct Professor, Columbia Business School (C’86, P’17, ’19); Nancy Flanagin Doyle, Founder of The Doyle Group, Consultant and Author, CFA (C’86, P’22); Guy Adami, Original Member of CNBC’s Fast Money (B’86, P’21, ’22, ’23); and Kathleen Murphy, President, Personal Investing, Fidelity Investments. This program was co-sponsored by the Center for Financial Markets and Policy and the Wall Street Alliance.
What aspect of the economy concerns you the most?
Mauboussin reminded us of the distinction between the 2008 financial meltdown and the COVID-19 pandemic, which is an exogenous shock. There remains a fundamental question of when the economy will open back, and the timeline will have a great impact on the economy. Additionally, “how” we go back to work is also very important, said Doyle. Consumers may behave differently post-pandemic, and many companies will have to adjust their marketing as well as product development approach. Each sector, however, has its unique differences that we should strive to understand.
Murphy, observed the trends in investing for the last month. She noted that several conservative retail investors tend to convert their assets into cash quickly, while most institutional/workplace participants have kept their assets allocation, as is. Many more people, especially millennials, have opened IRA accounts recently as they review their financial plans for retirement. These are certainly good news, confirming the endurance of liquidity in the markets.
On macro perspectives, Mauboussin offered an optimistic outlook on the lessons learned from the 2008 crisis while Adami warned us of potential ramifications such as inflation from the extensive use of fiscal stimuli.
What should people be doing right now with their finances? How should we make financial decisions in stressful situations?
Doyle advocated for a review of “emergency reserves” of approximately three to six months of normal living expenses. She advised people not only to review their savings and assets but also to coordinate with their partners to avoid the trouble of not having enough liquidity in their savings.
Murphy advised us to maximize workplace IRA contribution and to stick with our existing plans through the pandemic. Sometimes “sticking with our plans” is harder to be executed than said. Mauboussin noted that our stresses can negatively affect our financial decisions by physiologically shortening our time horizon. Short-term reactions can work against our long-term goals if we do not have discipline. The “fear of missing out” can create panic on both the upside and downside, Adami reflected, and it is harder to “separate emotions from equations” when investing. He suggested that investors should think carefully and rationally about the factors to be priced in and stay “non-attached” to any stock.
How should people who just embark on their careers and those who are near retirement assess the current situation?
The panelists agree on one common ground rule that it is important to start investing early and put our money to work hard for us in the long term. Younger people should understand their liability position and saving ratios. These are good habits and skills to learn. Whether via ETFs or active investing, those with discretionary money can certainly use the market’s downturn as an opportunity to learn and to take advantage of the future rebound. Periods like this reward fund managers with skillful analysis.
The panelists advised the people nearing retirement to understand and take advantage of government programs such as IRA contributions and social security benefits. Combining professionally managed funds with some downside protection in the money market can also create a good balance.
We want to thank all participants in the webinar and the support of John Wooters, managing director of the Georgetown University Professional Alliance. The Center of Financial Markets and Policy regularly provides thought leadership, research, and discussions in the areas of global finance, fintech, and financial policies. Georgetown’s Wall Street Alliance is committed to strengthening the ties between the university, alumni, GU students, and the financial community.