Market Pullback (Coronavirus) or Correction?
I don’t know why I become amazed at the dramatization on the business/market news station I listen to and watch! Yes I certainly understand the markets pulled back last week, dropping Major Stock Indexes into negative territory for the 1st month of 2020. I guess it’s all about drama, as drama increases viewership and ratings!
I’m thinking, hey, after a 30% rise in the US Markets last year combined with trade concerns, the election, etc., the markets needed an excuse to pull back.
The Coronavirus is certainly very serious, and needs to be viewed as such. We do however have some market history. There have been approximately 12 virus outbreaks since 1981, according to Argus Research. In each case the S&P 500 was higher in both 6 and 12 month after each virus emerged. So far responses have been swift and let’s hope the virus is contained, and then cured!
I do expect the virus to impact US GDP to a small degree, and China to a more significant degree. Let’s see what spillover impact will result…. hopefully not much!
The markets will price in the impact and hopefully as in the past, move higher shortly thereafter. If the pullback turns into a correction, that is not any reason to panic as pullbacks and corrections are very normal and should be expected!
Markets for the Week
All major equity indexes fell last week with the Dow Jones falling (2.52%), the S&P 500 (2.10%), the Nasdaq Composite (1.76%) and the Russell 2000 (2.89%).
Over the pond, the MSCI EAFE International Stock Index dropped (2.50%) and the MSCI Emerging Market Stock Index (5.09%).
Bonds as expected in this environment rose as the yield on the 10 Year US Treasury finished Friday with a yield of 1.52% which was below the 3 month Treasury Yield.
US GDP 2.3% for 2020
The US economy grew by 2.3% for 2020 as announced last Friday. The 4th quarter number was an expected 2.1%.
The annual 2.3% is the slowest in 3 years and probably held back by the US/China Trade situation as most are speculating.
Our debt situation, which doesn’t seem to get a lot of attention, is now over $23 Trillion Dollars! That’s a lot of dough! The interest we’re projected to pay on our debt this year is $460 Billion Dollars. 4 years from now, the projection is between $684 and $713 Billion Dollars. Where will this increasing debt service payment come from?!!!
Punxsutawny Phil Predicts Early Spring
Punxsutawney Phil was put to the test on Sunday Morning at 7:25 am. The tradition was brought to Western PA by German Immigrants and has been celebrated since 1887! Great news, we hope, Phil did not see his shadow which suggests an Early Springtime!
Springtime definitely breeds optimism. What a great time of the year. Let’s hope it comes early this year!