At the beginning of March, most families were looking forward to graduations, vacations and other enjoyable spring activities. But as the new coronavirus crisis unfolded and the economy began to take a hit, many plans and budgets were put on hold—especially for those experiencing pay cuts and job losses.

As difficult as the situation has been, it actually can provide some useful perspective, says Guy Hockerman, CPA, CFP, senior vice president and financial planning manager for Commerce Trust Co. He explains that it’s a good time to do a couple of things: Study past downturns to get an idea of what to expect, and re-examine financial priorities according to your current needs.

“We counsel clients to remain calm, think positively and take care of the most important things first, like making sure their families are OK,” Hockerman says. “Then, we can look at how the market downturn is affecting their investments and balances. This situation is like being on a boat in choppy water; it may be hard to focus on where you are going right now, but it will get easier eventually.”

Hockerman says he gets clients’ reactions to the market downturn and asks whether their investments have performed as they expected. “We revisit the planning we’ve done in the past and talk about any life changes like layoffs or salary cuts,” he notes. “Then, we answer the client’s questions and make adjustments where possible. For example, maybe you were budgeting for home improvements, summer travel or a semester overseas for your college student. These are things you probably can postpone now.”

Joe Williams, CFA, director of investment strategy for Commerce Trust, says the current market situation is known as an ‘equity waterfall decline,’ or a sharp drop in equity prices due to a particular cause or event. He offers some interesting notes about the phenomenon, which hint at what the second quarter of 2020 might look like:

▶ There have been 13 waterfall declines, starting with the Wall Street crashes of 1929. All were triggered by economic events; this is the first caused by a virus.

▶ Investors usually react similarly each time there is a crisis. The initial phase tends to be chaotic, with a decline of about 30% in equity prices as investors panic. A low is reached, then a sharp ‘relief rally’ follows for a couple of days.

▶ The rally fades and volume decreases, and the market usually revisits the low over the next couple of months.

Hockerman adds that once you have taken stock of family issues, it’s important to schedule an appointment with your adviser. “He or she can meet by phone or videoconference to talk about changing priorities and strategies that make sense in this climate,” he says. “It’s also an ideal time for parents to talk with older kids about the ups and downs of investing, and why it’s important to spend and save wisely. This can be a wonderful opportunity to pull together, reinforce good financial habits and build family unity.”