Market Perspective for February 29, 2020

It was a very difficult week for the market, due to concerns of coronavirus on global markets. While the Nasdaq finished up 0.01 percent on Friday, it still fell 10.49 percent on the week.  The S&P 500 Index and Dow Jones Industrial Average slid 11.47 and 12.34 percent, respectively, over the past 5 days.

This week’s volatility highlights the benefits of diversification. Bonds were stable in the face of falling stock prices. Fidelity Corporate Bond (FCOR) gained 0.14 percent. iShares iBoxx High Yield Corporate Bond (HYG) fell just 2.59 percent. Some subsectors were strong performers. iShares Nasdaq Biotechnology (IBB) outperformed the market with a decline of only 7.23 percent.

Often during selloffs, investors are tempted to make rushed and emotional decisions regarding their positions.  It is very important to stick to your long-term plan. Far too often, people sell at or near the bottom, while not reinvesting during a subsequent rebound. Doing so can significantly impact both the short-term and long-term portfolio performance. We do not recommend timing the market.  The best option is to remain patient and consult with your financial adviser.

While it was not widely reported, economic data remains solid. New home sales were far higher than expected at an annualized pace of 764,000 for January, above analyst forecasts of 722,000. Pending home sales in January also increased.

Consumer confidence increased in January according to both the Conference Board and University of Michigan surveys. The Chicago PMI for February increased from January. All indicators point to a strengthening economy.

The coronavirus was the obvious reason for the dramatic decline, but investors panicked reaction doesn’t reflect the reality. China’s economy is already coming back online. Apple (AAPL) CEO Tim Cook said factories in China are open and production is rising by the day. Look for those gains to extend into next week’s trading.

 

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