While the long-term civic and economic impact of the COVID-19 pandemic remains to be seen, this unprecedented public health emergency has already had a profound effect on the financial markets. The combination of significant societal and financial disruption and a still-uncertain future is a formula for nervous investors and volatile markets.
But while the nature of the current crisis might be new—and the scale of the disruption historic—investors and financial professionals alike can take comfort in the fact that the underlying dynamics are extremely familiar.
Market volatility is unavoidable. The key is to understand that volatility: to look at historical examples to recognize what drives it, to appreciate how investors and advisors usually react to it, and to understand how savvy investors should (and shouldn’t) respond in a crisis. Because once you understand the lay of the land, and have identified the obstacles in your path, you can set a course that will enable you to navigate this—or any—crisis and emerge safely on the other side.
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