A week’s worth of Volatility: Coronavirus

     The updated reports of the coronavirus have monopolized headlines and greatly impacted the public markets this week.

The disease’s bearing on the global economy is very difficult to quantify, we have already seen the negative ramifications for the global communities and slowing markets for goods and services.  We believe that the influence on economies is likely to be more protracted than expected.  The foreign health agencies have warned of the continued spread of the disease, they are working hard on the containment of the virus. 

     From a financial market perspective, the recent week’s downturn has erased the gains in the stock market over the past 12 months.  Some return of gains was inevitable, in our view, as the market had reached historic high valuations.  Notably, the losses demonstrated in the past week pales in comparison to the market gains in the past 10 years.  Since early 2009 to late 2019 the S & P has expanded approximately 340%.  We believe this broad perspective may help to suppress any impulsive knee-jerk reaction to sell or make a poor short-term decision.  The swift losses in the market are never ideal, we are not sellers in this market.  The rapid shift of market sentiment lead to a surprise 50 BP (1/2) point cut by the Fed to boost confidence on March 3rd.

We were putting cash to work this week, buying at lower prices.

    The market has traded with great speed and volume in addition to the precipitous drop this week.  It is important to know that we have positioned our client portfolios with care, and we have created diverse portfolios purposefully.  This tactful approach to financial market exposure helps us prepare for such market volatility.  Our goal is to invest in the market by selecting investments that have price upside and protect holdings on the downside.  We are not momentum based traders, although we are engaged in the markets on a daily basis.

Recent market moves are creating buying opportunities, as the market is moving to an oversold position.

Beth Genter
President
ehgenter@schenleycapital.com