Market Commentary 2/29/2020

By: Matt Garrott

February came to a turbulent end with the S&P 500 down 3% or more during three trading sessions last week.  The S&P 500 was down 8.23% for the month and 8.27% for the year.  The 10-year Treasury yield is under 1.13% as a global flight to safety pushed yields down from 1.92% at the beginning of the year.

Fear-driven selling due to coronavirus is the lead story all over the media.  Both supply and demand were shocked as China aggressively quarantined its population.  Expect fewer reports on things returning to normal.  For example, after shuttering half of its 4,000 stores in China, Starbucks says 85% are now open.  Active coronavirus infections have been dropping by about 1,500 patients each day for the last two weeks.  Expect good news to be met with skepticism.

We usually caution against predictions of the future, but investors also have an obsession with predicting the past.  That is, answering ‘why’ the market went down to justify trading in reaction to an event.  Whether the market is down due to virus fears, primary election results, or some other event doesn’t matter.  Preparing for downside movements occurs in the financial planning process and is not dependent on answering ‘why’ the market moved down.  In this way, we are proactive rather than reactive and aren’t reliant on predicting the future or the past.

Is This a Buying Opportunity?

It’s an opportunity to exercise your financial plan.  That might call for rebalancing and tax loss harvesting.  Investors who are in the wealth accumulation phase have their fingers crossed that the market dip lasts until pay day so their retirement contribution buys a bit more.  We are optimists/realists, but that doesn’t mean buying every dip.  Sometimes the best course of action for investors is to sit on their hands and stay out of their own way rather than trying to time the bottom of a drawdown or pick stocks they think should outperform.

What Are We Watching?

We monitor reality and data, not hypotheticals and worst-case scenarios.

Johns Hopkins Center for Systems Science and Engineering put together a great dashboard that tracks various coronavirus statistics.

The CDC has an excellent resource center presented in plain English.

The WHO’s situation reports provide a more detailed look at a more global level.

Here in the United States, it will be time to worry when coronavirus is considered an emergency rather than a vehicle to score political points.  The US is leading the way in developing a vaccine, but for all the posturing and fast-tracking, the irony is that you probably won’t get one.  Not due to lack of supply or high cost, but because half of American adults skip the flu shot each year.

Talk to Us

Sometimes bouts of market stress get carried over into physical stress for people.  This can mean anything from not getting enough sleep to snapping at friends to being glued to the screen of a smartphone.  Worrying about the markets is normal.  Letting that worry carry over into trading away from your financial plan or negatively influencing physical habits is something to be mindful of.  We are happy to talk about what’s going on in the markets or in your portfolio in person, by phone, or via email.  Just talking things through can make a difference.

Fairway Scorecard 2-29-2020