Folks, there is no sugarcoating it – this was a truly ugly week for investors around the globe. The stock market endured its worst performance since 2008, as the S&P 500 fell 11.5% while the Dow Jones Industrial Average surrendered 12.4%.
Equities faced heavy selling pressure throughout the week as coronavirus-related fears caught up to the market, which appeared immune to these concerns just a week ago.
The accelerating spread of the coronavirus outside of China was the main worry, leading to greater uncertainty about the viability of global supply chains. Intel (INTC) ordered its employees to avoid travel to China and several other countries, but on the bright side, Apple (AAPL) CEO, Tim Cook, said on Thursday that his company is working toward resumption of full production.
U.S. health officials acknowledged that the coronavirus is likely to spread through the U.S., which contributed to the pressure on stocks. The CBOE Volatility Index jumped more than 23 points to 40%, ending the week at its highest level since February 2018 when an inverse volatility ETN imploded.
The communication services sector (-9.5%) was the only group with a slimmer loss than 10.0% while the remaining sectors retreated between 10.4% (consumer staples) and 15.4% (energy). The growth-sensitive energy sector widened its Q1 loss to 24.7% while crude oil lost $8.54, or 16.0%, since last Friday, falling to its lowest level since late 2018.
Treasuries charged higher throughout the week, sending the 10-yr yield lower by 34 basis points to a fresh record low of 1.13%.
I won’t pretend to know much about the coronavirus, because I don’t. I’ll leave that up to the disease experts and physicians. But I have been following this situation closely, as I’m sure many of you have. Here are my takeaways on the virus and the markets:
- The media is in full blown hysteria mode. And the media is never your friend in a crisis. Remember, they thrive off of negative news and fear, particularly when it impacts the stock market.
- The coronavirus is still much less of an overall threat to this country than the common flu.
- The chance of contracting the virus is still extremely low.
- The world is not going to end.
- The global markets will recover.
- Underlying economic fundamentals remain healthy. Also, the Fed has indicated it will take necessary action to support the economy if needed.
We will get through this, as always. And if you have excess cash burning a hole in your pocket (in other words – you have no short-term needs for the cash) you may want to consider putting it to work in the market. One thing is for certain – there is much less risk in the equity markets now after this week’s rout.
Source: Briefing Investor