Lessons from a Correction

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For many investors, Monday felt like a slap in the face. Following news over the weekend of a oil price war between Saudi Arabia and Russia, the S&P500 traded down over 7% at the open. A move so swift, it actually triggered the 1st circuit breaker measure - a system put in place in 2013 to prevent these types of flash crashes. Its a strange day when almost everyone can be heard discussing the markets. In the gym, in the line at the grocery store, in the lobby of my building, yesterday was one of those days.

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Beware of Behavioral Biases

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The coronavirus (COVID 19) breakout has been a fascinating real life case study of behavioral finance and the effect it can have on investors, particularly those operating outside of a trusted advisor relationship. Behavioral finance is the field of study that looks at investor psychology as it relates to money. It reveals the many pitfalls and fallacies the brain is vulnerable to when dealing with decisions specifically relating to money or investments. It is no secret that people, in general, are not great at investing. Emotions can be powerful and counter productive. Separating one’s feelings from the facts is a high hurdle for many Americans, leading many to doing the exact wrong things at the worst times.

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March Private Client Letter - Navigating a Crisis

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We at Clearwater Capital Partners have often written about the importance of “facts over feelings” when it comes to navigating periods of market volatility and uncertainty. The current breakout of the novel coronavirus has produced a significant spike in feelings (specifically “fear”). Now is the time to keep emotions in check as we attempt to ascertain the “facts” connected to this difficult situation. We believe one’s reaction to higher volatility will be far more determinative to long-term progress than the volatility itself.

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