Market Commentary for the week of March 9, 2020

The Markets

The U.S. added 273,000 jobs in February, and the unemployment rate dropped to 3.5 percent. But despite the strong employment news, stocks fell Friday as the number of confirmed coronavirus cases topped 100,000. Still, at the close of a roller-coaster week, the three major indexes had eked out small weekly gains. For the week, the Dow rose 1.79 percent to close at 25,864.78. The S&P gained 0.65 percent to finish at 2,972.37, and the NASDAQ climbed 0.12 percent to end the week at 8,575.62.

Source: Morningstar.com. *Past performance is no guarantee of future results. Indexes are unmanaged and cannot be invested into directly. Three- and five-year returns are annualized. The Dow Jones Industrials, MSCI EAFE, Barclays US Agg Bond, NASDAQ and S&P, excluding “1 Week” returns, are based on total return, which is a reflection of return to an investor by reinvesting dividends after the deduction of withholding tax. (TR) indicates total return. MSCI EAFE returns stated in U.S. dollars.

From the Beginning — After the recent global stock market fall, the nearly 11-year bull market run for the S&P 500 that began on the morning of March 10, 2009, gained 449 percent (total return) through Friday, Feb. 28, an annualized return of 16.8 percent per year (source: BTN Research).

Who Loves a Bull Market? — The wealthiest 1 percent of American households owned 56 percent of the entire value of all U.S. equities as of September 2019 (source: Goldman Sachs, BTN Research).

Let Me Correct You — During the nearly 11-year bull market that began on March 10, 2009, the S&P 500 index has had seven separate corrections of at least 10 percent but less than 20 percent. The ending dates of the seven corrections were July 2, 2010; Oct. 3, 2011; Aug. 25, 2015; Feb. 11, 2016; Feb. 8, 2018; Dec. 24, 2018; and Friday, Feb. 28. The latest correction (through Feb. 28) came just nine days after an all-time closing high was achieved (source: BTN Research).

WEEKLY FOCUS – Staying on Course in a Choppy Sea

The stock market isn’t known for its emotional stability. At times, it appears euphoric over a good jobs report. At other times, rosy employment data convinces investors the Fed will likely raise or decline to lower interest rates, resulting in a market drop. Throughout 2019, reports on the progress or setbacks of trade negotiations with China alternately pushed stocks up or dragged them down.  

Recently, headlines on the spread of the coronavirus, quarantines, travel restrictions and related deaths have rocked the market. Last week, stocks rose after Federal Reserve Chairman Jerome Powell hinted the Board might cut rates — but plunged when it did. Stocks rebounded after Super Tuesday results came in but fell the next day. Market free falls and rebounds have made investors feel like they’re tethered to a bungee cord and suffering from severe whiplash.

When the markets react emotionally, it’s imperative to think rationally. Although no one can predict the future, panicked selling during a downturn is often the worst thing you can do. Think of investors who sold their stocks during the 2008-2009 market dive; they missed a massive comeback in the next five years that could have obliterated their losses.

Prevention is the best medicine for our health – washing our hands, not touching our face in public,  getting enough rest, eating healthy and avoiding contact with individuals who are ill or have been exposed to someone ill. Similarly,  planning for potential volatility before you experience it is vital. 

It’s important to understand market volatility is normal. Risks and returns are linked together; you usually have to take some risk to make money. Particularly in a low-interest rate environment, overly safe investments – such as bonds, CDs or bank accounts – won’t provide much growth. So, you may need to balance potential market loss against the danger of flat savings not keeping up with inflation or not lasting through 20 to 30 years of retirement.

There is no magic strategy that always works in every environment. There will be times your account balance drops in value. Consulting your financial plan and talking to us when you have concerns can give your logic the boost it needs to keep emotions from running roughshod over your financial goals. If you have questions or would like to review your existing financial plan, please call our office.

*The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities America, Copyright March 2020. All rights reserved. Securities offered through Securities America, Inc., Member FINRA/SIPC. SAI# 2986491.1