Timely & Relevant News: Ongoing Coronavirus Concerns

Fears over the spread of COVID-19 (coronavirus) have gripped the country and sent stocks in the US and around the world tumbling into bear markets.

What makes this pandemic so much more personal than other crises is how it is felt by everyone, as nearly all major events have been cancelled, major league sports seasons have been postponed, travel restrictions have been put in place, many employees are being sent home to work remotely, planes are empty, and many shoppers are staying away from stores and restaurants. These significant efforts to contain the outbreak are also the same actions that will have an impact on the US economy.

The US economy was very healthy before this stretch of steep market declines, with employment strong and the unemployment rate near 50-year lows, solid job and wage gains, corporate profits poised to accelerate, and company balance sheets in excellent shape. Now, as we head into the second quarter, the presence of an economic slowdown is a reality.

Context here is important. Fear, as a core human emotion, is magnified when situations arise unexpectedly and quickly. In other words, it has been the speed and unexpectedness of recent events that has driven the outsized reaction from the markets. In fact, the S&P 500 Index needed only 16 days to go from a new all-time high to a bear market (measured as 20% off the recent highs), an all-time record, topping the previous record of 28 days.

Stimulus help is on the way. US equity markets experienced more loss when the Federal Reserve (Fed) announced it would inject an extra $5 trillion of liquidity into short-term funding markets over the next month. Ultimately stocks resumed their sharp declines on Monday as COVID-19-related economic uncertainty once again gripped markets. As prospects of some relief from the impact of the outbreak improve through policy actions, a return to trend growth or better afterwards may begin to come into view. Nevertheless, markets will likely remain volatile until we gain greater clarity on the timing and depth of the economic slowdown and investor confidence is restored.

The only thing worse than not having a plan is abandoning the one you have. The stock market has already suffered declines similar to those associated with mild recessions. That doesn’t mean stocks can’t go lower. It just means that the opportunity for long-term investors is getting more attractive. While markets continue to face a crisis of uncertainty, we still have confidence in the long-term fundamentals and prospects for the US economy and corporate America.

If you have any specific questions, hesitations 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  contactus@covenantwealthstrategies.com to set up time to discuss further. 

LPL Research Center