Coronavirus Update, Friday February 28th, 2020
As the coronavirus continues to make headline news, this week the stock market has responded with the first and fastest correction in 2020. We would like to address some of the key points we feel are relevant to you to keep you informed.
- The spread of coronavirus globally to South Korea, Italy, and Iran, has fueled significant uncertainty
- The CDC called for Americans to prepare for the possibility of a coronavirus outbreak in the US.
- These fears have rattled the markets, sending the S&P 500 down -7.25% over the last three days (almost 15% since February 19th) and the US 10-year Treasury yield to an all-time low at 1.14%
- Fed funds futures are currently pricing in more than 25 basis points of easing before year-end, though the Fed may remain on the sidelines until US economic data reflects evidence of a slowdown
- This is the worst selloff since 2008’s housing crisis but also the fastest the market has ever moved into a correction
- Oil is -32% ($21+) off its January 8th high of $65.65 due to increased inventories and a global slowdown being caused by the virus but we expect demand to increase going into Summer
- The spread of the virus is increasing at a decreasing rate, but it is still premature to state that it is under control https://www.worldometers.info/coronavirus/#countries
- The media may be over-hyping the severity of the virus, fueling some of the recent selloff
- Several countries are working on a cure to the virus and a vaccine should be produced within the next several months, if not weeks
- Companies have warned of reduced profitability for at least the first quarter of 2020
- Some great values can be found in companies that generate excessive cash flows and have better than average profitability relative to their peers
- For those of you that have PUT options in your portfolio(s), we sold them recently for a 50%+ realized gain to reduce your downside market participation
- Corrections are healthy for the markets and this current scare may have the added benefit of bringing critical industries, previously outsourced to other countries, back into the U.S.
- Fluent Financial will continue to focus on finding value and we expect a rapid rise in prices once virus concerns subside
We will continue to look for opportunities to add value to your portfolio during these chaotic times in the market. Please feel free to reach out to us so we can address any of your questions or your concerns. As always, we appreciate your business and the trust you put in us.