March 10, 2020 | Coronavirus Resources

Coronavirus and the Markets – Legacy’s Outlook

With the significant market reaction over the past few weeks to the coronavirus, we think it is important to remember some basic principles of investing and what determines investment success.

First, the most important factor in determining investment success is you, the investor. No, it’s not the markets; rather, it’s designing and implementing the right plan for your goals. Yes, this sounds trite, but it’s true. Designing the right plan to meet your long-term goals is not easy. Unfortunately, what is easy is abandoning that plan, and abandoning the plan is the path to investment failure.

Why do people abandon their plans? Usually because of declines in their portfolio, extreme volatility or becoming fearful about world events. Will the coronavirus irreparably alter the future growth of the world economy? Not likely. Will it cause short-term hiccups in business activity leading to earnings short-falls? Sure. But abandoning one’s plan every time there is some sort of crisis or gloom on the horizon is a poor strategy. As the chart below shows, history is filled with major crises and events that can shake one’s resolve. As the chart also shows, however, the long-term trend is up.

Here is a second important principle: the world is full of potential danger and uncertainty and that, actually, is a good thing. Investors are paid to take risks. If there were no risks, there would be no returns.

Let’s put some numbers to this. Legacy’s Expected Return Model has been giving us guidance since we developed it in the middle of the financial crisis, in fall of 2008. This model uses reported earnings on the S&P 500, assumes the market will gravitate towards “fair value” over time, and grades the current market on a scale from “Over-Valued” to “Under-Valued.”  The model does not depend on some subjective forecast of future earnings or stock prices. As legendary investor Warren Buffet put it, “[t]he only value of stock forecasters is to make fortune tellers look good.”

Shortly after we developed our model, the stock market hit bottom in March 2009. At that time the model graded the market as extremely “Under-Valued.” The S&P 500 is up over 380% since then. Most of the time over the past 10 years the market has been “Fairly Valued” according to our model. After the most recent market activity we remain in the “Fairly Valued” range. Further declines in prices will move us into “Moderately Under-Valued” territory. This warrants staying invested in equities.

It is hard to see the value of your portfolio drop, but unless you need to liquidate now, a drop presents a buying opportunity. Bond prices are up significantly so rebalancing portfolios gives one the chance to take profits in bonds and take advantage of these lower stock prices.

We are long-term optimists. History tells us that the trajectory is up, towards more freedom, more wealth, better health, greater literacy, and longer lifespans. All of this benefits those who think long-term and invest long-term.

If you are a Legacy client and want to discuss your plan or risk comfort zone, please do not hesitate to contact your Legacy advisor. If you are not a Legacy client and are interested in learning more about our approach to personalized wealth management, please contact us at 920.967.5020 or

S&P Composite Index

Source: J.P. Morgan Asset Management, 2020


This information has been prepared by Legacy Private Trust Company for informational purposes. Any opinions expressed herein represent our current analysis and judgment and are subject to change. Actual results, performance, or events may differ based on changing circumstances. No statements contained herein should substitute for professional legal, tax, or other specialized advice.