As anticipated, the Federal Reserve recently cut interest rates by half a percentage point in light of the coronavirus outbreak and in efforts to stabilize the economy. The new benchmark interest rate is at a low of 1% - 1.25%.
Lowered interest rates represent an opportunity. “The markets have been very volatile the past couple weeks, due to the on-going concern of the effects of coronavirus on the world economy. While we continue to monitor the markets, we see an opportunity for consumers to take advantage of historically low interest rates in the form of re-financing mortgages, student loans, car loans, opening a home equity line of credit, etc,” said Bill Lloyd, Wealth Advisor for Covenant Wealth Strategies.
Regarding the coronavirus, Dr. Jennifer Lighter, hospital epidemiologist at NYU Langone Health, stated that “In the U.S., it’s really a fear based on [the] media...” New illnesses tend to result in more headlines, instigating a disproportionate amount of panic. To better understand the actual situation, it is important to rely on credible sources with real data. The World Health Organization still won’t call this outbreak a pandemic because of the extremely low mortality rate among those who are young and healthy.
As the situation settles down, we believe that market volatility will continue for a time and then eventually return to pre-outbreak levels. Investors are expecting to see continued global economic growth and corporate profits over the next several months.
On an encouraging note, the markets just had a historic day on Monday with the Dow logging its biggest point gain in history— 1,294 or 5.1%. The S &P soared 4.6%, its best day since December 2018 and the Nasdaq closed up 4.5%.
During these times of market volatility, we are continuing to remind our clients to stay on course with long-term goals. Ask your financial advisor if this is a good time to take advantage of buying opportunities. We still believe the economic backdrop is supportive.
If you have specific questions or would like to discuss your own investment strategy or financial planning needs, we welcome you to call us at 302.234.5655 or email us at email@example.com to set up time to discuss further.