It has certainly been an interesting year. We have a lot to celebrate. The markets and the economy are on solid footing; therefore, the returns in our clients’ portfolios have been solid as well.
However, before we go too far, we all know the Coronavirus is spreading in China and beyond. While we may research and talk about this in stark economic terms, we do not forget that there is a human cost because of this virus. It breaks our hearts to think of millions of people quarantined and thousands dying. We urge you as we remind ourselves, to continue to pray for these people. Pray that our Lord will do something miraculous, heal people, and glorify Himself while doing so. And whether He does this supernaturally or through modern medicine, we give Him the honor.
With that said, understanding how the Coronavirus affects markets and the economy is a difficult task, mainly because of a significant lack of trust in what the Chinese are reporting. It seems clear that the virus is worse than reported, however, it is possible that this same opaque reporting causes the markets to eventually ignore these headlines. On the flip side, this is one of the scary news stories that we will pay close attention too.
Now, what else has happened so far in the short year of 2020? The United Kingdom has finally left the European Union in what is called Brexit. This was once a huge headline; I am not sure that it was even on the front page the day it happened. So much for the big news. The Impeachment trials covered it up. President Trump has now become the fourth US President to be impeached by the US House of Representatives. However, as you know he was acquitted by the Senate. Both Brexit and the Impeachment happened and the US stock markets went up!
Wow, so much for the headlines. Much could be said for the reasons behind the markets going up on this news. We believe the US markets see an economy on solid ground and an easy monetary policy from the US Fed. Couple this with stable regulations and rule of law and this is a recipe that US stock markets like.
At the moment, we like what we see in the short run. However, the big unknown is the Coronavirus, and this is precisely why we have our rules-based models. This allows us to measure data and take a risk-off stance if the facts point to us doing so.
We are happy to explain more. If you want the nerd version, please read our investments team’s report that follows this and call your Sound Financial advisor. As always, we thank you for the trust that you give us.