The Coronavirus has dominated the market’s attention and indexes appear close to wrapping up their worst week in over a decade. As of the end of Thursday most broad indexes in the US and across the world had fallen about 12% to 15% from recent highs. US indexes are in correction (greater than a 10% decline) for the first time since late 2018.
Last year markets were fairly quiet with few trading days of large moves. There were only two US market downturns and both were relatively light and brief. Normally we get three to four meaningful market declines per year. Entering 2020 we believed US stock valuations were at fair levels but were certainly not cheap. That meant that any unexpected news of risks to growth or earnings would likely cause markets to become more volatile, and a global illness obliged as the unexpected news.
So while the pace of the market drop has been surprising, the fact that a fairly-priced market experienced a periodic correction because of a new risk to global growth is not.
There is no doubt that the coronavirus has done and will continue to do economic damage on top of the cost to human life. The likelihood of the US entering recession remains low, but the market correction is close to turning into a bear market in which a recession is already priced. Whatever the effects of the coronavirus, they will almost certainly be temporary and if so, permanently lower market prices are unwarranted. While risks remain as they always do, this pullback represents one of the few times over the last decade when cash could be deployed into markets at meaningful discounts to recent highs.
As always we welcome your questions about markets and your portfolio and hope you will call or email us with these. We hope you have a great weekend.
PAST PERFORMANCE IS NOT AN INDICATION OF FUTURE RETURNS. Information and opinions provided herein reflect the views of the author as of the publication date of this article. Such views and opinions are subject to change at any point and without notice. Some of the information provided herein was obtained from third-party sources believed to be reliable but such information is not guaranteed to be accurate. In addition, the links provided within are for convenience only and the provision of the links does not imply any sponsorship, endorsement, or approval of any of the content. We do not guarantee the content or its accuracy and completeness. The content is being provided for informational purposes only, and nothing within is, or is intended to constitute, investment, tax, or legal advice or a recommendation to buy or sell any types of securities or investments. The author has not taken into account the investment objectives, financial situation, or particular needs of any individual investor. Any forward-looking statements or forecasts are based on assumptions only, and actual results are expected to vary from any such statements or forecasts. No reliance should be placed on any such statements or forecasts when making any investment decision. Any assumptions and projections displayed are estimates, hypothetical in nature, and meant to serve solely as a guideline. No investment decision should be made based solely on any information provided herein and the author is not responsible for the consequences of any decisions or actions taken as a result of information provided in this book. There is a risk of loss from an investment in securities, including the risk of total loss of principal, which an investor will need to be prepared to bear. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be profitable or suitable for a particular investor’s financial situation or risk tolerance. Exencial Wealth Advisors, LLC (“EWA”) is an investment adviser registered with the Securities & Exchange Commission (SEC). However, such registration does not imply a certain level of skill or training and no inference to the contrary should be made. EWA may only transact business in those states in which it is registered, notice filed, or qualifies for an exemption or exclusion from registration or notice filing requirements. Complete information about our services and fees is contained in our Form ADV Part 2A (Disclosure Brochure), a copy of which can be obtained at www.adviserinfo.sec.gov or by calling us at 888-478-1971
