Pandemics, Market Crashes, and Retirement Stewardship


Note: Because of extreme volatility, the stock market data I use in this article is changing daily (sometimes hourly). To keep it as current as possible, I used stats for the S&P 500 as of the market close on Tues., March 3rd.

You have no doubt taken note that the reported value of your retirement assets has declined substantially over the last few weeks. Or perhaps you have heard the news but may have been afraid to look at your account balance. I understand completely.

I have written about stock market volatility before—which is what this is—albeit, volatility with a capital “V.” We are amid a significant market decline which is entering “correction” territory and may become a full-fledged crash at some point.

The stock markets had been hitting all-time highs. Then, over a week, the S&P 500 was down nearly 13% from it high on February 19, 2020. During the week of February 24th through the 28th, it lost over 11%, the worst weekly performance since the October 2008 crash!

Take a look at what happened day by day just last week:

  • Monday: -3.35%
  • Tuesday: -3.03%
  • Wednesday: -0.38%
  • Thursday: -4.42%
  • Friday: -0.83%

Then, on Monday, March 2nd, the S&P 500 was up over 4.5%—crazy! It seemed to be in response to the likelihood of aggressive fiscal stimulus by countries around the world to stave off recession. Then, on Tuesday, March 3rd, the U.S. Fed announced a 50 basis-point reduction (1/2 of 1 percent), the largest since 2008, and the S&P 500 fell almost 3%. To keep things in perspective, at one point in 2008, the markets were down 40-plus percent, and we are nowhere near that (at least not yet).

There is no reason to believe that extreme volatility is over. The widest swings tend to occur in clusters during periods of high volatility. It only takes one good or bad headline to send the market in either direction.

From what I can tell, there are three things driving the recent dramatic declines in the global markets: (1) surprise (apparently, no one saw this coming); (2) emotion (mainly fear); and (3) valid concerns about both short- and long-term productivity and supply chain disruption leading to recession, especially due to the potential component supply shortages in China.

I think the suddenness and rapid spread of the virus caught the world off-guard. This pandemic is first and foremost a human tragedy, regardless of the economic ramifications. But it hit the world markets hard. We had watched blissfully as they reached one new high after another, then BAM!— a sucker punch out of nowhere knocked them down.

The fear of a mass contagion that is taking lives is understandable. The virus is dangerous since it spreads quickly, can be fatal sometimes, and there is as yet no antidote. Containment measures, better treatment, and a vaccine will result in a decline in its spread over time. But no one knows when that will be, perhaps a year or longer.

The most dramatic impacts (apart from the loss of life) have been on global stock prices. Still, they are an indicator (at least to some extent) of investor confidence in companies’ ability to sustain current profit levels. There’s no way to know what the long-term impact will be, and uncertainty drives stock prices down as caution becomes the order of the day.

Most of us invest in stocks to capture historically high after-inflation growth in corporate profits and dividends (for retirees like me, the emphasis is on the latter). But we must remember (and this correction comes as a stark reminder) that such gains are subject to gut-wrenching plunges, which can rattle us quite a bit.

If you are nearing retirement and have a large (greater than 60 or 70%) percentage of your portfolio in stocks, I regret to say that you may need to reevaluate your plans due to impending sequence of returns risk. If this pandemic should lead to a long-term recession (which economists admit has a greater than zero percent probability), your silver bullet will be to keep working until the markets rebound, if that is an option.

How long will that take?  Well, if you expect me or anyone else to tell you how bad it will get or how long it will last, and when it will get better, I don’t know. From a historical perspective, it may be a few months or a few years.

I don’t think it makes sense to bail out of stocks altogether at this juncture (when they are 5, 10, or 20% down), but you may want to make some adjustments further down the road under more optimal circumstances, especially if you are too heavy in stocks.

If you’re wondering what you can do to practice wise retirement stewardship considering such challenging times, here are few thoughts:

This is a time to keep our emotions in check.

We all have emotions, and they are a gift from God. God knows and understands that we will sometimes be afraid (“When I am afraid, I put my trust in you”—Ps. 56:3.) When we are, we know that we can draw close to God because he is near to us (Matt. 14:27; 28:10).

We must learn to control our emotions, or they will control us. Our emotions can play a big part in our financial decisions, often to our detriment. We may spend or buy and sell our investments based on emotion. We get into trouble when our emotions cause us to act unwisely or irrationally.

All emotions are not bad—they tell us to beware and help us to avoid danger. But as a general rule, succumbing to fear (when the markets are tanking) or greed (when they are soaring) will make a fool out of us. If you ask almost any financial advisor at a time like this, they will tell you not to panic. I agree, but that doesn’t mean you should do nothing.

If you are ten or fewer years from retirement or already retired, this is an excellent opportunity to reassess your risk tolerance.

Assuming you are investing based on your predetermined risk tolerance, diversification strategy, age, and life circumstances, how do you feel about how your investments are performing during a time of high stress? Now is a terrible time to realize that you can’t tolerate as much risk as you thought.

If you determine that you have taken on too much risk, think long and hard about doing anything drastic during such uncertain times. If it would help you sleep better at night to reduce your exposure to stocks now when stocks are lower but still at historically high levels, you are free to do so.

But if you’re comfortable with your risk tolerance and don’t need money from those stocks in the next five years or more, I would suggest standing pat—in five years, things will look very different than they do now.

This is a time for learning.

Now is an excellent time to learn some important investing lessons. After many years with a generally upward market trajectory without such steep declines, this is a good “test case” for your investing strategy.

Since I am retired (no longer working for pay), I am relying on my investments for some of my retirement income (the rest comes from Social Security). I would describe my portfolio as “moderately conservative” and “income-oriented.” As I recently pointed out, I have intentionally reduced my stock allocation over the last few years—from 60% down to 35%. And I have to say, at this point, I’m glad I did. But I also have to be honest and say that I was second-guessing myself after the S&P 500 gained almost 29% (including dividends) in 2019.

This time of extreme market turmoil provides me with an excellent opportunity to see how my strategy works. The S&P 500 is down about 10% from its February 19th high (this changes almost daily), but my portfolio has lost less than 4%. The reason is that as some of my investments have declined (for example, one of my “core” dividend stock funds—SCHD—is down about 11%), several of my bond funds are in positive territory, in the 1% to 2% range.

Because of (generally) rising interest rates (at least until this week), most of my bond funds are short to mid-term in duration. My goal is to optimize income while minimizing interest rate risk. I have a large investment in a TIPS fund, which has also held up well; in fact, it has gone up slightly.

I can also see some benefits of diversification in my stock funds. Although I invest mainly in dividend-oriented funds, between the three I own, I hold a portfolio of several hundred stocks across almost all industries. Looking back at the S&P 500, some are doing better than others. Utilities, real estate, and technology stocks have declined less than global energy companies (which is understandable).

None of us like to see our investments go down. But because of diversification, I have lost about 4% instead of 10%. That is the lesson of owning both stocks and bonds and well-diversified funds within each of those categories. Bonds are supposed to be boring. And, sometimes, even investment-grade corporate bonds decline when stocks plunge—there is no perfect diversification solution.

If you’re still working and a relatively long time (i.e., ten years or more) from retirement, these recent events shouldn’t bother you too much.

You may think, “What! Are you crazy?” If so, please bear with me on this.

If you are still in the accumulation phase—working, saving, and investing for retirement—you might try to view these market declines as a positive for you.

Sure, you don’t like to see the declines in your account, but it can be a GREAT time to pick up some bargains, which could pay off down the road when the market recovers (which it most likely will).

I don’t recommend that you buy on impulse. But if you had something on your candidate list, and have already done your homework, then you may pick it up “on sale.” Be mindful, however, that even though stocks are down, they remain at near-record levels.

Timing the market is always risky; that has been proven time and time again. Because we don’t know how bad things will get, I suggest not trying to “guess” when the markets will bottom out and waiting until then to buy. A better approach may be to buy incrementally (which you are effectively doing if you are contributing monthly to a 401k or IRA). It works like “reverse” dollar-cost averaging.

Since World War Two, there have been 12 bear markets resulting in losses averaging 32.5%. On average, it takes just two years for the stock market to recover. It took eight years for the markets to recover from the Dot-com bubble burst in 2000. The real estate crash of 2008 followed close behind, which sent the markets down over 40%. It took about six years for stocks to rebound to their previous all-time highs, and as we know, they kept going up from there. In all other instances, the markets recovered in a year or so, hence the two-year average.

Will this scenario be similar? No one knows. But you can read an excellent article about the disease at “Corona Virus: There Are Better Things To Do Than Panic.

This is a time to remember that only God knows and controls the future.

No matter what anyone says, they can’t know what the future holds or control it—only God does. That is true whether we are talking about the weather, economics, the stock market, interest rates, inflation, politics, or anything else. Our responsibility as wise stewards is not to predict the future but to manage our finances in a wise and disciplined way, planning as best we can for any eventuality.

Knowing that we live in a fallen and broken world, we should not be surprised when bad things happen. The recent outbreak of the coronavirus is a prime example.

It was just a matter of time before something big and scary happened and sent the markets into a tailspin. It has happened before, and it will happen again. It may come as a surprise to us, and it may be downright frightening. But it isn’t to God since he knows and controls all things in time:

Remember the former things of old, for I am God, and there is no other; I am God, and there is none like Me, declaring the end from the beginning, and from ancient times things that are not yet done, saying, ‘My counsel shall stand, and I will do all My pleasure’ (Isaiah 46:9-10).

This is a time to trust God, not our investments.

Do what you can (or must), but always remember that your ultimate trust and security is in God, not your investments.

God cares about your investments. He cares about all areas of your financial life. Did you know there are over 2,000 verses in the Bible on finances and possessions in the Bible?

Consider this verse where Jesus himself encouraged us: “Do not be anxious, saying, ‘What shall we eat?’ or ‘What shall we drink?’ or ‘What shall we wear?’ For the Gentiles seek, after all these things, and your heavenly Father knows that you need them all” (Matt. 6:31-32).

God knows that we need to save and invest wisely for our future—he encourages this in verses like Prov. 6:6-8; 13:11; and, 21:20. He also understands that times of economic upheaval can tempt us to doubt or fear. In such times, he cares for us as a loving father cares for his children. He also calls us to partner with him by doing our part—wisely living out the principles he gives us in his Word.

But we have put our faith and trust in God. Our savings and investments must be our servants—tools that we can use for our good, the good of others, and the glory of God. Otherwise, they will rule us, and as the Bible clearly states in Matt 6:24, we “cannot serve God and money.”

This we know: The stock markets may go up or they may go down (they have both, dramatically, over the last week or so). We may be wealthier or poorer in a year than we are now. But, ultimately, it doesn’t matter because it was never our wealth in the first place. “We brought nothing into the world, and we cannot take anything out of the world” (1 Tim. 6:7).

All that we have belongs to God. Manage it for him as best you can. Do what you can to control your spending, don’t take on any unnecessary debt, and continue to save and give regularly. Keep an open heart and hands and trust him for the rest.

To quote an old Indian proverb that is a favorite of mine: “Trust God, but row away from the rocks.”


👋 Hi, I’m Chris Cagle, the founder of Retirement Stewardship, a blog that focuses on the various aspects of retirement from a Christian stewardship perspective (1 Peter 4:10).

I write as a retiree who is dealing with the things I write about. I base most of the articles on my research and experience applying it to my situation and how it might apply to yours.

If you’re new here, check out the site introduction for an overview. You can also learn more about me.


My Books

Redeeming Retirement: A Practical Guide to Catch Up (2021)
The Minister’s Retirement (2020)
Reimagine Retirement: Planning and Living for the Glory of God (2019)