With stock prices, even bond prices, falling faster than they rise the next day, fear is dominating many investors’ thinking about investing and many current life activities. Schools, restaurants, churches are closed, temporarily. Gatherings of even a few people are discouraged. Numerous US states are implementing business lockdowns and stay-at-home strategies to contain the spread of COVID-19. At current, there are no tools (vaccine, drug) to address this novel virus, other than shutting economic activity down to buy time for the doctors and drug scientists. Unclear is when we are going to open the economy back up (April? May?), or if we can make it through the year without shutting down again in the Fall. Closing the economy is adding to everyone’s fear of the unknown – a multi-dimensional fear not limited to just Coronavirus, and including the prospects of severe economic/financial damage. Put simply, most all news seems bad.
In pursuit of providing clients access to timely and relevant commentary to the current coronavirus market impact, below are links to research and analysis updates we are receiving. The aim is to share articles that add or enhance the understanding of the root worry (coronavirus and it’s impact on the global economy) and/or provide historical perspective on prior market corrections.
I am hopeful this will be a final Market Alert relative to the past few weeks of hysteria, fear, and market turmoil. The market spoke loudly yesterday (Thursday, March 12th) as it blasted on all areas of the financial markets – gold, bonds of greater risk orientation, and stocks around the world. We are hopeful recent action was the capitulation event for the market forming a bottom – it never feels like the bottom near the bottom. Time will tell. We do not know, we cannot model how Coronavirus will evolve and/or how it is minimized. We expect Washington will deal with the public erosion of confidence being expressed in the economic and financial markets both here and globally.
To start, one should read this following thought several times: “It never feels like a low near the low”.
Market Stress is absolutely no fun. After all these years (over 40), market drawdowns are terrible and bewildering; confounding one’s ability to comfort others when no one knows the future. We can review history (a lot of examples) to offer perspective, but providing certain future direction is not possible. We are all in it together.
Ironic – today, Monday March 9th is the 11th Anniversary of the March 2009 stock market lows, meaning this date was the start of the current bull market advance (we’re wishing it runs longer).
Generally, we are not fond of writing Market Alerts, as it often signifies market action that is unsettling to investors and clients. Further, no one knows exactly how to model a global pandemic. And, we usually don’t give a passing thought to the entity that China uses to describe its New Year, this year being called the “Year of the Rat.” Not to travel that path; yet most are well aware that rats carry all sorts of disease and illness if active pursuits of cleanliness and pest control are not followed. The global health environment appears to be actively searching for effective measures to curb the spread of Coronavirus. Additionally, Washington DC appears to be treating current events as mainly a health-policy issue.
If we owned a crystal ball, we might know when to sell before big market moves down. If we owned a crystal ball, we might also know when to buy at the market low, before big moves up. Would you like to use a crystal ball for your investment timing tool? We know that if you rely on the crystal ball for investing, sooner or later you will be dining on crushed glass. No one owns a crystal ball that works. Don’t attempt to use one.
Given the volatility in the global and domestic markets this past week, it may be helpful to summarize a few thoughts for consideration:
In recent days, the US financial market’s relative calm has fallen victim to rising fears relating to the coronavirus – more technically referred to as covid-19. In just two days, the S&P500 and Dow have “skinnied” by more than -6% and the loss over the last week roughly -7.5%. Many international markets are down even more sharply, especially amid already weak or recession-like economic data. This is a stark contrast from the very attractive gains the market was enjoying in February as the narrative around the new virus seemed to be calming/contained from when it first began hitting newswires a month ago.
Here we are… the final day of 2019 and 2nd decade of the 21st century. The recent year provided stocks with their best annual performance in six years, but what a decade it’s been! The current bull market has endured over its entire tenure, albeit like most trends it was not without many periods where it looked over. If there was just one theme to characterize the economy and market direction over the recent 10 years, it would be “uncertainty”. Uncertainty and relentless skepticism was borne from a sub-par economic recovery; financial repression via historic-low interest rates; and what feels like extreme political unrest both in the US and abroad. But, financial markets often climb a wall of worry. 2019, and this current bull market, are testament to why time is each investor’s greatest ally and that one cannot allow themselves to invest based upon headlines or emotion. Investment success is all about “time in the market”, not “timin’ the market”.
On the heels of a September which was generally attractive, the markets entered October again looking spooky. In fact, like a year ago where the high for the year was observed on September 21, the S&P500 was off almost 4% between September 20 and October 2. That could be eerie for anyone paying close attention. In recent weeks, the US economic picture seems to be getting increasingly muddied by the sluggish international backdrop as fresh data ranging from manufacturing, services, inflation, and jobless claims all appears to be confirming a broad slowdown observable via downbeat readings coming in from abroad. Some meaningful market action reprieve arrived late last week as the US President offered a more optimistic narrative around current trade talks with China at the same time as reports of productive Brexit negotiations (a more than 2-year uncertainty at this point) we hitting the wires. Both domestic and international stocks jumped higher to end last week.
US stocks broke a multi-week winning streak, but did so with very “sleepy” daily moves. For the week ending September 20, the S&P500 gave up -0.5%, but remains +2.4% higher for the month. International markets also slipped, but likewise were controlled in their daily moves. Whereas the month of August was an alarmingly volatile period with 18 of the 22 trading days experiencing moves greater than ±1%, the S&P500 has closed up or down by less than 0.75% in each of the past 12 sessions – the longest such streak since the end of July. Such streaks appear common in 2019 when investors look uncertain about the direction of the global economic outlook.