What We Are Seeing:
Volatility and a bearish trend are the common themes in the stock market. Until we see evidence that the virus is going to be contained, and the country can get back to business, this will continue.
An oil war triggered by Russia and Saudi Arabia resulting in a dangerous game of chicken that has flattened prices. The slow- down in airfare, travel, and commerce has also added to the decline.
The impact of COVID-19 has affected economies and markets across the world. The economic toll is increasing due to lost business, and a recession has begun. The scope, severity, and duration are currently uncertain.
Most companies are lowering their earnings estimates which is being reflected in falling stock prices.
The S & P 500 has dropped 28% YTD, and the Dow Jones Composite took just 10 trading days to go from a 52-week high to a 52-week low.
Unemployment is going to rise.
What Is Being Done:
The Federal Reserve announced a broad set of new policies including cutting interest rates to essentially 0%.
Money Market Guarantees and Treasury Buy-Backs
Tax Filing has been pushed back to July 15, 2020.
A Massive Stimulus Package is on its way. (More to follow)
Positive Factors:
The banks are more stable and solvent than in 2008-2009.
The economy and consumers were in good financial shape before the virus hit, and the 2019 US stock market had a very good year.
A major government aid package given to state and local governments.
Fast-track on the manufacture of coronavirus test kits, without prior approval from the FDA.
With extremely low-interest rates, this is an optimum time to refinance your home.
Necessity is the mother of invention- and innovation and technology will help fight this and future pandemics through artificial intelligence, genetics, and telehealth.
Advances in genetic science have helped decode viruses at a faster pace. The SARS virus in 2002 took over a year to sequence, COVID-19 took less than a month.
If, and I repeat if, the virus can be contained in a relatively brief period, the recovery could be faster than expected due to a combination of pent up demand and government stimulus.
What We Are Doing:
Holding steady and not making any dramatic shifts in our client portfolios. This is when calm, disciplined, professional management is of utmost importance.
Assessing how our investments are holding up. If certain securities are not performing as anticipated or will be more adversely affected than others, we have been taking swift action. This has resulted in incremental changes to client portfolios as we attempt to navigate these chaotic times.
Looking for indicators that could determine the direction of the markets. This could include relief packages for certain industries such as airlines, any progress on the vaccine front, or additional news on virus recovery rates here and abroad.
For our long- term investors who can handle the current market fluctuations and are prepared to hold for an extended period, we are continuing to look for buy opportunities in the stock market. Though no one can predict a bottom and prices might drop further, history has taught us that events such as this can create significant investment potential.
For other investors, often, the best course of action is to take no action.
Final Thoughts
There is no denying that there will be an economic ripple effect for months to come. At this point, there is too much uncertainty to be able to determine how quickly this market will recover, but as the past has proven, WE WILL RECOVER.
SOURCES: Kiplinger, 361 Capital, MarketWatch
IMPORTANT DISCLOSURES
Investment advice offered through Strauss Financial Group, Inc., a Registered Investment Advisor.
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