Market Brief March 9 2020

The post today is to continue combating the chaos being reported. Markets dropped dramatically this morning as uncertainty around Coronavirus continues. Headlines I read this morning included Italy instituting the death penalty for buying surgical masks, fining people for leaving their houses, releasing 50,000 inmates from prison, USA having higher mortality rates than elsewhere in the world, new cases continuing to surge and spread to 100 countries, etc etc etc. I nearly found myself getting caught up in the concern. So, I started evaluating our portfolio positions, diversification, and performance. The results are quite helpful so I wanted to share.

The Market and Portfolio Allocation

From October to December 2018, the S&P 500 experienced a 17.51% drop. This time frame and index is being cited on the news as a comparison. As of right now the S&P 500 has experienced a total loss of 17.32% from the market high on Feb 19th. Although this drop occurred over a shorter period of time, this volatility is nothing new to those of us in the industry, but it also isn’t anything new to YOU. Majority of readers have been clients since Oct 2018, and many of you were uncomfortable, but really didn’t feel the weight of a 17.51% drop in the S&P 500 index.

This probably feels more substantial because of the constant bombardment of updates, but it has not been yet. We probably will get to the point where that will change, but remember that we are not investing in the S&P 500 index alone. The index is comprised of 505 (not a typo) large market cap U.S. domiciled companies, many of which are technology based. We are investing in many many more than 500 companies, we are investing in many different countries, we are investing in many different sectors, and we are investing in many different market cap sizes. As a result, our portfolios have continued to experience smaller losses than the S&P 500 alone. This is a very important piece of our overall strategy.

What is your plan? Volatility spikes, large selling occurs, and uncertainty is prevalent in the market and economy, schedule a call today. Let’s talk and determine how we can help you be prepared.

The Week Ahead

With that said, the market shockingly finished positive last week! As of close on Friday, the Dow finished up 1.8%, S&P 500 up 0.6%, and Nasdaq up 0.1% for the week. The Dow’s jump last Monday was the highest single day gain in the Dow history, finishing up 5.1%. This quickly evaporated due to the Fed’s actions of cutting interest rates 0.5% on Tuesday. The “Biden Bounce” lifted stock markets on Wednesday. The Coronavirus fears dominated headlines Thursday and Friday as cases in the U.S. increased.

Weaker economic data seems inevitable. Entities globally are taking cautionary steps to slow the virus and companies continue to lower guidance. The virus concerns overshadowed strong economic data last week from the non-manufacturing ISM and the February non-farm job reports. Unemployment rate dropped to 3.5%, mortgage applications and refinance activity surged.

The week ahead will duplicate last week. All eyes on the virus and reports of decline/improvement in cases around the world. On Saturday, the oil price war increased, as Saudi Arabia announced the largest price cuts in nearly 20 years. Oversupply of oil while demand is low? Complete opposite of Economics 101.

Year-to-date index performance through Friday, March 6; Dow down 9.37%, S&P down 8.00%, and Nasdaq down %.

Have a great week and keep your seat belt buckled!

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