Month: March 2020

Equities continued to rally on Monday, led by a 3.62-percent gain for the Nasdaq. The Dow Jones Industrial Average and S&P 500 Index both climbed more than 3 percent. Since bottoming last week, the Dow Jones Industrial Average has increased of 20.09 percent.

SPDR Healthcare (XLV) and SPDR Technology (XLK) were the leading sectors on Monday. XLV advanced 4.68 percent and XLK rose 4.21 percent. iShares Nasdaq Biotechnology (IBB) rallied 3.94 percent, iShares U.S. Healthcare Providers (IHF) 4.07 percent and SPDR S&P Pharma (XPH) 3.78 percent. Tech saw a similarly broad rally in its subsectors. iShares PHLX Semiconductor (SOXX) returned 3.48 percent and iShares Expanded Tech Software (IGV) 3.22 percent.

Pending home sales climbed 2.4 percent in February, yet another indicator the economy was on stable ground before the coronavirus pandemic.

Some early data from March comes out later this week. Economists predict motor vehicle sales fell from an annualized pace of 16.8 million in February to 11.0 million in March. They also expect the manufacturing PMI will slide to 44 percent from 50.1 percent.

Weekly jobless claims increased by 3.2 million in the week ended March 21. Analysts have not made a consensus forecast for this week yet, but it will be a closely watched report released Thursday.

Friday brings the March employment report. The consensus estimate calls for 25,000 lost jobs, down from a gain of 278,000 in February. Unemployment is expected to rise from 3.5 percent to 3.7 percent, and hourly wages to increase by 0.2 percent.

iShares MSCI EAFE (EFA) increased 2.02 percent on the day. iShares MSCI Emerging Markets (EEM) gained 1.65 percent. Emerging markets have greater exposure to commodities such as crude oil, which remain under pressure.

A few firms will report earnings this week. Among them are Carnival Corp (CCL), Walgreens Boots Alliance (WBA), CarMax (KMX), Chewy (CHWY), Constellation Brands (STZ), PVH Corp (PVH), NovaGold (NG) and Acuity Brans (AYI).

Equities staged a much-needed rally over the past several days. For the week, the Dow Jones Industrial Average gained 12.79 percent, the S&P 500 Index 10.26 percent and the Nasdaq 9.17percent.

Utilities, industrials, energy, financials, technology and consumer discretionary all outperformed. SPDR Utilities (XLU) rallied 17.31 percent, SPDR Industrials (XLI) 15.68 percent, SPDR Consumer Discretionary (XLY) 12.09 percent, SPDR Energy (XLE) 11.96 percent, SPDR Financials (XLF) 11.94 percent and SPDR Technology (XLK) 10.70 percent.

Investors should be prepared for continued volatility. The decline that began in late February was one of the fastest drops ever recorded. The ensuing 20 percent rally took only four days. Large and swift moves in either direction will continue. Focus on long-term objectives and resist overreacting to short-term volatility.

The Federal Reserve continued to take measures to support the market. It has already committed to buying at least $700 billion in assets: $500 billion in U.S. treasuries and $200 billion in mortgage backed securities. The Fed restarted the Term Asset-Backed Securities Loan Facility (TALF) created in 2008. It announced new lending programs for small businesses and consumers, worth up to $300 billion. It will help states and localities by purchasing municipals bonds. The Fed will purchase corporate bonds and ETFs.

Bond funds rallied on the news. LQD gained 14.65 percent on the week, Invesco Senior Loan (BKLN) 11.04 percent, iShares iBoxx High Yield Corporate Bond (HYG) 10.39 percent and Fidelity Corporate Bond (FCOR) 10.29 percent.

The passage of the $2 trillion stimulus bill offers direct cash payments to Americans, $500 billion in loans for corporations, aid for small businesses, state and local governments, hospitals and expanded unemployment benefits.

Crude oil remained under pressure this week with Saudi Arabia. West Texas Intermediate crude slid more than 9 percent to $21.84 per barrel.

Lululemon (LULU) delivered solid earnings this week, but citing the coronavirus complications, it refused to give guidance for the coming quarter. We expect most companies will similarly refuse guidance when earnings season begins in mid-April.

The markets have been awaiting further government intervention to reassure our citizens are protected as millions are being required to stay home.  The markets continued to decline, though the Nasdaq limited losses to 0.27 percent.

We want to reiterate that the market decline has not been caused by mismanagement of large corporations or a systemic problem in our financial markets.  This is an external event that leaves no company unexposed.

We are in a very rapid recessionary decent.  Still, we believe that the rebound will be equally impressive.  Volatility will remain high and daily fluctuations will be dramatic.  If you had a competent financial plan at the beginning of 2020, this is not the time to liquidate your portfolio.  The greatest risk investors face now is not further downside risk but missing the upside potential over the coming weeks and months.

Over the next month, GDP will slump, historically low unemployment rates will immediately reach historic highs. Our national debt will balloon.  The news will not be good.  Until we see a decrease in new COVID-19 cases, followed by government assurances we can interact with each other in public, concerns will remain.

Sometime over the coming days, we expect the United States Congress to pass a drastic and necessary stimulus package.  This should provide a short-term boost to not only workers and businesses, but for the stock market.  Even if you are considering changing your allocations, we believe it is best to wait until the stimulus bill is passed.

On a positive note, the Federal Reserve introduced new programs to support markets today. In addition to open-ended quantitative easing, the Federal Reserve will also create a “Main Street” lending program to make sure small businesses have credit access. Federal Reserve also reintroduced the Term Asset-Backed Securities Loan Facility (TALF) to help the flow of credit.

We expect a pickup in growth during the 3^rd quarter.  Solid, well capitalized companies with stable balance sheets will outperform when the market turns.  Investors will not make speculative bets.  Our preferred positions, including Vanguard Dividend Appreciation and iShares Edge MSCI Min Vol USA ETF (USMV) have declined less than the market and will outperform once stocks rebound. Both funds are very inexpensive, have excellent diversification and have outperformed more than 89 percent of their competitors.

Companies that used buybacks to improve their stock prices should be avoided. Focus on balance sheets, strong management and long-term viability.

At Mutual Fund Investor Guide and MDS Wealth Advisors, we are fully prepared to continue operations in the event further restrictions occur. Our technology allows us to work remotely, serving you without interruption – the exception being that you may hear young children or dogs in the background during our calls. We hope this is not a reflection of our professionalism but rather a reality of what we need to do to ensure our staff are safely with their families during uncertain times.

Our business operates in a small college town in northwestern Massachusetts. As colleges and schools have made unprecedented decisions to close and state leaders have placed restrictions on restaurants, gyms, entertainment and activities, it is important now more than ever to support your local communities. Even in large cities, if you have the means, embrace the businesses that we may have taken for granted over the years. They will need all our support to get through the coming days.