What a week! All major stock indexes fell into a bear market as economic concerns over COVID-19 continued to spread. Due to the highly contagious nature of the virus, we’ve see many cancellations of major sporting events, including March Madness. Other events, including The Masters and the Louisiana democratic primary have been postponed. Concerns over the spreading virus has even caused some states to temporarily closed schools. The lost revenue will almost certainly hit GDP in the first and second quarters of 2020, at a minimum. Bonds, especially low quality bonds, have seen some slight liquidity issues. The Fed has pumped up their buying to ensure that liquidity does not dry up.
Now that all that bad stuff is out of the way, we’ve been asked countless time this week what our thoughts are… Is this the bottom? No one knows for sure where the bottom is. If someone says it’s the bottom, they are completely guessing. The speed at which the market fell from the top was very fast. We had not seen a drop like that since 2008. What we do know is that the consumer was strong going into this event and the Federal Reserve and Federal Government seem to be willing to do all they can to spur economic activity. The idea of additional rate cuts, tax cuts, and tax holidays have been brought up. For every client, we have been actively reviewing current asset allocation vs their long-term targets to gauge where to go from here. If you were at target equity levels at the start of the year, you are likely underweight those targets now. Where it makes sense, we have been adding to equities to get back to our target weights. We are focused on making good decisions for each client we work with and when you stack good decisions on top of good decisions, you will come out ahead in the long run.
There is still a lot that we don’t know about the virus but we know that action has been swift to limit the transmission from person to person. The full economic impact and whether is will be sustained or bounce back quickly is still unknown. Don’t panic and stay calm. The largest up days in the market typically occur near the largest down days. If you have questions or want to talk about the markets, please give us a call. Have a great weekend! - JR