“For God has not given us a spirit of fear but…”
As I open the Wall Street Journal (wsj.com) on Monday morning the market has dropped over 900 points on the Dow Jones Industrial Average. Fears of the virus spreading outside of China have been stoked due to a quarantine in Italy near a European industrial hub and deaths in Japan.
First, when reading these stories, it is hard not to think about the human toll. We pray for the people affected, that God would heal these nations and glorify Himself.
Next, and logically so, our minds turn to economics and the global stock/bond markets. In our opinion, it is likely that the Chinese economy will be pushed into a recession and that the Japanese economy is already in one. This would mean that the number two and three economies in the World would be in a recession. Now that Europe may be affected, this drives fears of a global recession.
So, what should our answer be? This is why we at Sound built our Rules-based models, so that we would not make emotional, and in this case, fearful decisions. Therefore, at least our Rules will kick in and move our advisory models to a risk-off position if markets worsen. Also, our investment committee is discussing adding a rule to our investment strategy that cold move our models to a more conservative position earlier. There is a danger of “data-fitting” if we make a rule that “fits” our desired emotional outcome. And we will work to avoid this.
Therefore, this verse came to my mind this morning:
“God gave us a spirit not of fear but of power and love and self-control.” 1 Timothy 1:7 (ESV)
This is a verse that we have all heard, probably many times. But think about this verse a minute. God does not want us to be afraid. If He gives us a spirit of power, love, and discipline. This does not mean that we stick our heads in the sand and ignore the facts. No, we take the opposite track. We study the facts, pray, think, and design plans to take action, all while trusting God for the results that He wants.
We are working hard for you and trusting our Lord while we do so.
The following is our weekly update for the week ending February 21st.
In this week’s recap: Wall Street grapples with coronavirus unknowns; new Federal Reserve meeting minutes appear; existing home sales retreat; the price of gold climbs.
THE WEEK ON WALL STREET
Traders paid close attention to coronavirus developments and earnings last week, while wondering how the former might eventually impact the latter. Concern over updated infection numbers moderated risk appetite.
A pair of key stock benchmarks posted similar weekly losses. In New York, the S&P 500 declined 1.25%; the MSCI EAFE index (of developed stock markets away from North America) lost 1.24%. The Dow Jones Industrial Average retreated 1.38% for the four-day trading week; the Nasdaq Composite, 1.59%.1,2
MINUTES FROM THE FEDERAL RESERVE'S JANUARY MEETING
Last month, members of the Federal Open Market Committee felt the near-term outlook for the economy had improved slightly since the last Fed meeting in December. The minutes did note that the COVID-19 coronavirus outbreak “warranted close watching.”
Some analysts have wondered, if the coronavirus threat heightens, whether the Fed might cut short-term interest rates this year. The FOMC voted 11-0 in January to leave rates alone.3
FEWER HOME SALES, BUT MORE BUILDING PERMITS
Sales of existing homes weakened 1.3% in January, according to a new National Association of Realtors report. On the new home front, the Census Bureau said that the rate of permits for new residential construction neared a 13-year high last month.4,5
At Friday’s closing bell, gold was worth $1,646.60 on the New York Mercantile Exchange. Gold futures traded at a seven-year peak on Friday morning.4
TIP OF THE WEEK
Think about taking an inventory all of your assets this year. This can be useful not only for insurance purposes, but also for an estate strategy.
THE WEEK AHEAD: KEY ECONOMIC DATA
Tuesday: The Conference Board’s monthly Consumer Confidence Index.
Wednesday: A January new home buying report from the Census Bureau.
Thursday: The second estimate of fourth-quarter economic growth from the Bureau of Economic Analysis.
Friday: January consumer spending numbers from the Department of Commerce, and the final February Consumer Sentiment Index from the University of Michigan (an assessment of consumer confidence levels).
Source: MarketWatch, February 21, 2020
The MarketWatch economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.
THE WEEK AHEAD: COMPANIES REPORTING EARNINGS
Monday: HP (HPQ), Intuit (INTU), Palo Alto Networks (PANW)
Tuesday: Home Depot (HD), Public Storage (PSA), Salesforce (CRM)
Wednesday: Booking Holdings (BKNG), Lowe’s (LOW), TJX Companies (TJX)
Thursday: Anheuser-Busch Inbev (BUD), Baidu (BIDU), Best Buy (BBY), Dell Technologies (DELL)
Friday: Dollar Tree (DLTR)
Source: MarketWatch, Market Insider, February 21, 2020
Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Any investment should be consistent with your objectives, time frame, and risk tolerance. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.
QUOTE OF THE WEEK
“Faith is taking the first step, even when you don't see the whole staircase.”
Dr. Martin Luther King, Jr.
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