Coronavirus Infects Market

As of the writing of this blog, the Dow has had its worst week since the Financial Crisis, almost entirely due to global concerns regarding the Coronavirus. At yesterday’s close, the Dow Jones Industrial Average was down 3,784 points, or about 13%, from its prior high. We are, officially, in a market correction.

New cases of the novel Coronavirus continue to pop up in nations all over the globe, jolting investors and creating a seller’s market. As news continues to pour in, even Goldman Sachs has given a bearish assessment of future earnings, with GS Strategist David Kostin cautioning that S&P 500 companies could see no profit growth this year if the virus continues to spread. A recent article from the Jerusalem Post does give some hope, however, that scientists at the Galilee Research Institute are adapting an existing vaccine to combat this new threat. This vaccine has the potential to achieve safety approval in 90 days, assuming everything goes well.

So, with the information at hand, most investors are asking, “What should we do?” The answer? Nothing. For investors who are positioned for long-term success, reacting to short-term volatility threatens this potential success. It’s important, from an investor’s perspective, to take a step back from the inflammatory headlines and look at some prevalent facts about market corrections:

· On average, U.S. stock market corrections occur about once every year.

· Corrections are, in fact, healthy for the market.

· They aren’t typically tied to an economic crisis.

SEI recently published their thoughts on the economic impact of the Coronavirus, and in their opinion we are seeing “mixed messages” regarding market indicators. China’s top leaders have pledged a more proactive stance in fiscal and monetary stimulus, hoping to limit the contagion’s impact on GDP growth. If these efforts are put to fruition, this stimulus injection could provide a boost to China’s domestic economy and create an environment for a quicker recovery. This of course would be fantastic news for global companies that base a large part of their business in China, such as Nvidia, Intel, and other chip stocks.

Looking forward, expect more commentary regarding the economic impact of the Coronavirus, more inflammatory headlines, and more uncertainty. However, clients of Strategic Advisory Services, LLC should have peace of mind knowing that this type of short-term volatility is exactly why we created our unique approach to retirement income. Income in Stages, Money to Last™ is designed to combat both volatility and investor uncertainty.

As always, contact us if you have any questions or concerns regarding market uncertainty or your investments. We look forward to speaking with you soon.