Market Turmoil – Monday Morning Market Memo – March 23, 2020

Market Turmoil – Monday Morning Market Memo – March 23, 2020

Good morning,

First and most importantly, we hope you and your family are well during these difficult times. COVID-19 is impacting so many aspects of daily life right now, and it continues to be the driver behind the drop in stock prices. We wrote here recently how we do not know the path or course the pandemic will take, or when it will end. We also wrote a more comprehensive note last week discussing asset allocation, bear markets, and some stock market history (which we have attached below in case you did not see it). Asset allocation is a constant in portfolio management and COVID-19 is going to be in the news for a while and widely covered by the media. We don’t want to be repetitive here, so we’ll continue focusing on current events in the financial markets.

The major stock market averages all ended sharply lower last week as states such as New York and California took measures to curb the spread of COVID-19, raising Wall Street’s worries about the economic impact this pandemic will have. The major stock market averages posted their biggest weekly declines since 2008 during the Great Recession. The Dow Jones Industrial Average shed 17.3%, the NASDAQ Composite lost 12.6%, and the benchmark Standard & Poor’s 500 tumbled 15%. Bottom line, the market is pricing in a recession, and most likely a severe one. Remember, the market is forward looking, dropping before the recession actually hits. On the other side, markets generally start to rise again BEFORE a recession is over. This is (another) one of the reasons why market timing is so difficult and usually counterproductive. We believe that time in the market is more important than timing the market!

Looking to the week ahead, there are some notable data points due out, including earnings from Nike, Micron, and Paychex, along with economic reports such as New Home Sales, Durable Goods Orders, and Consumer Sentiment. These are all in the rearview mirror however, and will not be analyzed the way they would be under normal circumstances. What investors will really be watching is to see whether the market can find some sort of a bottom, along with details regarding the stimulus/economic aid package that is certainly coming out of Washington.

The market started this week with stock futures limit down overnight on reports Congress was so far unable to reach a deal on stimulus. Those losses have been mostly erased however, as the Federal Reserve has pledged asset purchases to support markets, along with comments from Treasury Secretary Mnuchin that a stimulus deal from Congress is “very close”. So it looks like another volatile week ahead.

As always, and especially during these difficult times, feel free to call us with any questions, to discuss your portfolio, or if you would like to set up a meeting with us.

All the best – Southport Station Financial Management, LLC