Wednesday, April 1, 2020
Many organizations entrust BlackRock to manage the investments in their employees’ retirement plans. We take that responsibility very seriously. I’m writing today because of the challenges created by the current crisis for people trying to save for retirement and to share our best thinking on how to navigate this very difficult period in the financial markets.
Our world is in the middle of an unprecedented crisis. Right now, we are all focused on the top priority: slowing the spread of the virus and protecting everyone affected by the outbreak – especially those who are ill, those on the front lines and those whose economic livelihood has been impacted.
Markets have fallen significantly since the beginning of the year, and many people are growing increasingly concerned about their financial futures, especially those who are near or in retirement.
But in times of such extreme market volatility, we believe it is essential for investors to keep a long-term perspective. I recognize that this is not always possible. Millions of Americans are facing immediate financial distress and need cash today. But, for those who are financially able to stay invested, history shows that people do best when they take a long-term view.
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Millions of Americans are facing immediate financial distress and need cash today. But, for individuals and families who are financially able to stay invested, history shows that people do best when they take a long-term view.
It is helpful to put this situation in perspective. While the market moves are reminiscent of the financial crisis in 2008, we do not think this is a repeat of 2008 – the economic and financial backdrop is much stronger today than it was in the crisis of 2008. We believe today’s situation differs in meaningful ways that should make it possible for the economy to bounce back more quickly.
There are steps you can take to safeguard your own financial health. If you are invested in a target date fund, which is often the default in retirement plans, your fund is designed for the long-term, including periods of market volatility. For those nearing or in retirement, that means these funds have reduced your exposure to stocks over time, simultaneously increasing your investment in less risky assets like bonds. For younger investors with more exposure to stocks, you have a longer time horizon and you stand to benefit as the market eventually improves – if you stay invested.
This brings me to my next point, which applies to target date and non-target date investors alike: the importance of staying invested. History has shown us that missing days when the markets are rebounding can be costly to your future. In fact, since 1987, every major decline in the U.S. stock market has reversed itself between 21% and 68% within the next 12 months.1 We believe that in most cases the best course for retirement savers is to stay the course.
If you’d like to read more about our market insights and/or investing for retirement during volatile periods, we have information available at blackrock.com/navigatingvolatility.
As an investor, an employer, and a father, I feel how uncertain everything is right now. I know these are challenging times, but if we keep our eyes on the long term, I also know we will get through this together and that we can be stronger for it.
Remain safe and well,
Rob Kapito, President of BlackRock
Navigating retirement savings during volatile markets
Whether your retirement is decades away, just around the corner, or where you are today, we share several considerations to keep in mind as you navigate this very difficult period in the financial markets.
