Fulcrum Wealth Advisors, like most firms, has been fielding many calls about this current market situation. Many people are asking about this year’s outbreak of the coronavirus as it relates to the economy and stock market. First, we want to be sensitive to the families suffering from this outbreak. Sadly, some will feel the loss of loved ones (of all ages) long after the stock market recovers.
The reality of this outbreak hits us daily as we see the newly reported infections, deaths, closure of business, travel restrictions, and self-quarantine guidelines daily reiterated in the news. Further, we see the daily volatility with market fluctuations we have not seen since the financial crisis in 2008-2009. As most of us in the USA have never gone through this type of emergency it can feel even more confusing. Our goal in writing this is to put a container around some of the variables we are monitoring in our humble hope of bringing clarity.
Using Bloomberg, we are monitoring total confirmed cases, confirmed recovered, and confirmed deaths. A major unknown is the peak number of confirmed cases from this virus: the market is going to discount the loss of GDP and loss of earnings growth for companies as the number of new confirmed cases grow.
As our country finally takes this virus more seriously, we will see some businesses close temporarily, social events canceled, travel postponed, etc. This lack of activity will hurt companies’ earnings and GDP. Until the number of confirmed cases here and globally peak we will expect volatility in the stock market to continue as economic activity will erode. When we see the total number of cases plateau and more importantly decline, then we will begin to feel confident we are nearing the bottom of this market decline. Revisiting our most recent blog (A Return to Volatility 2020 #5 - https://www.fulcrumwa.com/blog/return-volatility-2020-5), we stated the stock market had a high P/E multiple and would be vulnerable to negative headlines, such as the Coronavirus, the Presidential Election, and fear of recession. Further, we stated there would be more Federal Reserve rate cuts and quantitative easing. All these predictions became reality.
The sooner we get relief from the coronavirus the greater chance of a V-shaped recovery; the longer it takes to get relief, the greater the chance of a U-shaped recovery.
Investment advisor representative of, and securities and investment advisory services offered through Cetera Advisor Networks LLC, member FINRA/SIPC, a broker/dealer and Registered Investment Advisor. Cetera is under separate ownership from any other named entity. Some Investment advisory services are offered through Fulcrum Wealth Advisors, LLC. Fulcrum Wealth Advisors, LLC is a registered investment advisor in the State of Washington. Branch Address: 10940 NE 33rd PL., #210 Bellevue, WA 98004 Branch Phone: 877-400-0260 The views stated in this letter are not necessarily the opinion of Cetera Advisor Networks LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change with or without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.