Broker Check

Titus Wealth Report - Coronavirus Market Update

| February 27, 2020
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After several months of relative calm in the markets volatility has returned via COVID-19, aka Coronavirus. 

 

Every virus outbreak is different, but looking back at other major global outbreaks over the last three decades (SARS, bird flu, swine flu, Zika, etc.), we can see that the impact to the U.S. and global economies and stock market has tended to be short-lived. It’s possible the current outbreak has the potential to follow a similar path, although there is still significant uncertainty. The coronavirus has spread more quickly than SARS, the most comparable outbreak, but the policy response also has been more aggressive, and the survival rate has been higher.

 

To put this week’s declines in perspective the S&P 500 historically has experienced an average peak-to-trough intra-year decline of about 11%. In other words, the S&P 500 has fallen 11% at some point during most years before ending higher. This latest pullback that we’re experiencing is still well within the normal range of market volatility. On average, the S&P 500 has experienced three to four pullbacks of around 5–10% per year.

 

It’s also important to remember that the global economy had started to see a pickup in momentum in late 2019/early 2020, before the outbreak. Leading indicators of economic activity were pointing higher. Purchasing managers’ surveys for the United States and Europe had improved. And corporate America delivered solid better-than-expected fourth quarter 2019 earnings results, with many companies saying good things about their 2020 outlooks.

 

Many view the coronavirus as a delay in—not an end to—the global economic acceleration story that has been unfolding since December’s U.S.-China trade deal. That momentum has put the global economy and corporations in better positions to weather the coronavirus storm. Most likely there will be global economic impact from the coronavirus over the next several months, but investing fundamentals make the case for a rebound later this year, potentially with some help from government stimulus.  We are looking for opportunities to deploy monies in short term bonds to equities in a few time periods to dollar cost average.

 

Based on history, it is possible that we may see a return to pre-outbreak levels of global economic growth and corporate profits within the next several months—which could continue to power this bull market and economic expansion through 2020 and possibly beyond. As I like to say, “it’s hard to watch the movie when you’re in it”.  


Stay Rationale and we will get through this together. In the meantime, give us a call if you would like to discuss strategy at a granular level.

Important Information

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

All data is provided as of February 24, 2020.

This Research material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

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