The coronavirus outbreak has accelerated in recent days, amplifying the anxiety of already-concerned investors about its impact on global growth and corporate earnings. As a result, global equity-market volatility has increased and share prices have declined.
We expect volatility to continue for the short-term—as long as the extent of the impact on global economic activity remains unknown, which will likely be until the virus runs its course. But once it does, we have every reason to believe that business activity will return to normal. The important concern is that the longer the virus is active, the greater the impact on the global economy and the longer it will take business to bounce back.
Having said that, we are increasing our risk controls and making small adjustments to allocations to lower risk. We are closely watching some key levels in the S&P 500. Stocks have broken through several important levels (50 day and 200 day trend lines) and could retest the point where it broke out to new highs last October. Early on Feb 27th the market dipped to 3,007 before bouncing back a bit. The 3,000 level is key.
I expect the market to drop to that level at least once more before we know whether that level will hold.
Remember that your financial plan was constructed to deal with market volatility and the inevitable pullbacks. Feel free to call me with any questions or concerns.
Sources: All Star Charts, SEI Private Trust
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