Let us hold tightly…
What do you do when the headlines, the statistics, and the new social distance “rules” keep coming? What do you do, when for the third time in a week the market futures “limit down” and hit a circuit breaker? What do you do when, for the first time you go to Church via live stream and the grocery stores run out of toilet paper? What is that anyway?!?
Monday, March 16th, was one of those days. Also, the last three weeks have been those types of weeks. But times like these don’t last forever and we believe there are better days ahead.
Let us hold tightly without wavering to the hope we affirm, for God can be trusted to keep his promise.
This wonderful verse from Hebrews 10 describes the certainty of God’s awesome promises. He is working all things for good His way and one day will re-make all things new. Imagine no pandemics, falling markets, or any other scourge on this earth.
However, in the meantime, we will trust Christ and work hard. So, what are we doing now?
As we have described in earlier articles, we have already taken one step closer to conservative. We then planned to wait as more data grew for us to take measured next steps. Some of this data has become available, but for weeks the markets have been far more volatile than we want to trade. Typically, market volatility subsides relatively quickly, but these market movements have been unprecedented. Therefore, what is our next step? The US Federal Reserve has stepped up in a tremendous way committing more than $2 trillion to the bond markets and the economy. Because of this, we believe there will be good opportunities in the bond markets and plan to rebalance our clients’ accounts to take advantage of these. Of course, there are no guarantees, but we believe this is a solid and conservative move. The primary risk that we see in this action is a “V” shaped market recovery in which the stock market rebound fully and quickly, but we see this as a limited risk.
Our current challenge remains volatile markets. We are watching daily for a good opportunity to rebalance. We know these are difficult and different times. But these times won’t last forever. Remember that you should invest for the long term and whether with stocks or bonds we will build high-quality long-term portfolios, and we will continue to work hard on your behalf and appreciate your trust in us.
In this week’s recap: Continuing concerns over COVID-19, aided by cuts in oil production overseas, contributed to continued market volatility.
THE WEEK ON WALL STREET
Markets remained exceptionally volatile, buffeted by the spreading impact of coronavirus, uncertain responses from federal policymakers, and the sudden drop in oil prices.
The Dow Jones Industrial Average fell 10.36%, while the S&P 500 declined 8.79%. The Nasdaq Composite index slid 8.18% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, dropped 17.75%.1,2
Markets Grapple with Uncertainty
A dispute between Saudi Arabia and Russia over oil production cuts, mounting fears of the coronavirus, the declaration of the COVID-19 as a global pandemic by the World Health Organization, and the news of a travel ban from Europe unsettled markets throughout the week.
Stock trading was halted twice by circuit breakers, which are designed to briefly stop trading when losses in the S&P 500 reach 7%. Stocks sold off sharply Thursday before ending a tumultuous week with a strong rebound on Friday.3
Troubles in the Oil Patch
The failure of Russia to join Saudi Arabia in supporting lower oil production targets left Saudi Arabia fuming. In response, Saudi Arabia announced its intention to raise oil output.
Oil prices plummeted on the news, contributing to the stock market’s drop on Monday. While lower oil prices may represent a boon to consumers in the form of lower gasoline prices and relief to companies with high energy consumption (e.g., airlines, chemical), they also pose a risk to the American energy industry. If low oil prices persist, it may lead to lower capital expenditures and potential issues in the credit markets as less-well-capitalized companies struggle to manage their debt obligations.4
The world’s central bankers have already taken several steps to combat the economic impact of the coronavirus, including lowering short-term interest rates. The financial markets are now looking for a response from the U.S. government. In evaluating any actions from the federal government, investors may focus on the size and timing of policy proposals to determine if they can reduce current levels of economic uncertainty.
TIP OF THE WEEK
Are you in your fifties and providing eldercare to one or both of your parents? As you help them in their retirements, remember not to neglect your own retirement planning, as these years of your life are among the most important for that effort.
THE WEEK AHEAD: KEY ECONOMIC DATA
Tuesday: Retail Sales, JOLTS Report (Job Openings and Labor Turnover Survey), Industrial Production
Wednesday: Housing Starts, FOMC (Federal Open Market Committee) Announcement
Thursday: Leading Economic Indicators
Friday: Existing Home Sales
Source: Econoday, March 13, 2020
The Econoday 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: Coupa Software (Coup)
Tuesday: FedEx Corp. (FDX), MongoDB (MDB)
Wednesday: General Mills (GIS), Ctrip.com (TCOM)
Thursday: Tencent Holdings (TCEHY), Lennar (LEN)
Friday: Tiffany & Co. (TIF), BMW (BAMXF)
Source: Zacks, March 13, 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.
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