How bad is the stock market sell-off?

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The stock market’s swift collapse has left many investors with more questions than answers.

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Wall Street’s plunge has been historic. The longest-ever bull market for stocks ended last week just days after marking its 11th anniversary.

You might be asking how bad is this? Are we headed for a recession? Should I rebalance my portfolio? 

Here’s a rundown of answers: 

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How bad is this drop vs. 2007-2009?

While the drop into a bear market over the past month is the fastest on record, the Standard & Poor’s 500 still hasn’t fallen nearly as much as it did at its bottom in 2009, when it had plummeted 57% during the Great Recession. The index is off nearly 30% from its Feb. 19 high. 

What has concerned investors is the swiftness of the latest leg down. It took just 16 trading days for the S&P 500 to plunge into a bear, defined as a 20% fall from a recent peak. That was nearly twice as fast as the stock market’s topple into a bear in 1929, according to LPL Financial.

Has the bear slashed all the gains under Trump?

Stocks have lost most of those gains. As of Monday, the S&P 500 is up about 11.5% since Election Day on Nov. 8, 2016. At its high on February 19, it had gained nearly 60% from Election Day. The broad index is up just 5% since Trump’s inauguration, down from roughly 50% in mid February.

Are we in a recession?

Economists and analysts have raised their odds of an imminent downturn. Global supply shocks from the pandemic will likely drag the country into a recession as consumers and businesses cut spending, according to Goldman Sachs. 

The U.S. economy will shrink 5% in the second quarter after zero gross domestic product growth in the first three months of the year, the bank’s economists wrote in a note Sunday. 

To be sure, because the U.S. economy entered 2020 on a strong footing, economists forecast that this downturn will likely be shorter than the recession following the global financial crisis, which lasted 18 months. Goldman Sachs expects growth to rebound 3% and 4%, respectively, in the third and fourth quarters. For the full-year, their forecast was lowered to 0.4% growth, down from 1.2%.

Should you rebalance?

Wealth advisors have advice: Stay the course and remain calm. Cheaper stocks are a good thing for investors over a long-term horizon. Check in on your investments. Some of the recent weakness could serve as a buying opportunity.

“This will eventually pass,” says Julia Carlson, founder and CEO of Financial Freedom Wealth Management Group. “The risk-reward is still way better in stocks than bond funds over the long term. Sometimes we feel like we have to make a change in a situation like this, but if someone is appropriately diversified and they have the right strategy in place, the decision to stay the course is completely fine.” 

If you feel like you can’t stomach the recent losses, you may need to readjust your allocations to make sure you’re invested for the long haul, experts say. 

Should you refinance?

First-time homebuyers and refinancers are set to benefit as interest rates have fallen back to record lows, a move that will cut borrowing costs even further on mortgages.

The average fixed rate for a 30-year mortgage rose to 3.36% last week, that’s almost a full percentage point lower than 4.31% a year ago. The average rate on a 15-year mortgage slipped to 2.77% from 2.79% a year earlier.

“With interest rates at historic lows, anyone with a mortgage should be seriously considering refinancing,” says Tom Myers, CEO and Managing Partner at Bordeaux Wealth Advisors. “For anyone who doesn’t have one, they should consider obtaining one.”