We, the entire world, are facing a historic situation. The soundness and safety of our lives and those of our friends and families is threatened in a fashion which is uncommon in our history though not unprecedented. Decades ago, the Spanish Influenza and the polio epidemic, and more recently SARS, H1N1, MERS, Zika stand as examples where we have pulled together to not only survive but ultimately conquer the threat to our common welfare. The chart below shows stock results during several medical shocks over the last 40 years.
The Federal Reserve cut rates on Sunday night to basically zero, and announced a $700 billion Quantitative Easing (QE) program. The Fed is also coordinating with the Bank of England (BOE), Bank of Japan (BOJ), European Central Bank (ECB), and the Swiss National Bank (SNB) to boost liquidity globally. This coordinated approach by monetary authorities is a big positive.
Now it’s time for policymakers to get their act together. Monetary policy alone is not enough, and a coordinated fiscal policy is needed to stem the economic deterioration from the Coronavirus response.
The markets appear to be pricing in what is known (economic and earnings slowdown) and what is feared (unknown number of coronavirus deaths and economic recession/depression). Identifying an exact bottom in the markets is nearly impossible, but much like in December 2018, the market seems very oversold. Until the spread of the disease is arrested, we will be in uncharted waters as to the length and severity of the human and economic impact. We expect continued volatility in the markets in the short-term. As such, we continue to de-risk portfolios. We remain hopeful the current situation is temporary, will reverse once the virus is under control, and will not have long-lasting effects.
We take solace that our planning and investment process has dampened the impact for our clients. We renew our commitment to always do our very best for you. Together, we can navigate this historic situation.
We encourage everyone to remain positive and practice prudence for the protection not only of your health and that of your family and friends but also for our neighbors and communities.
Jim and everyone at Directional Wealth Management
Sources: Guggenheim Investments, Clark Capital Management, Transamerica
Although information herein has been obtained from sources deemed reliable, its accuracy and completeness are not asserted. All opinions and estimates included in this report constitute the judgment of the financial advisor as of the dates indicated and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.
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