Has This Market Already Priced In An Economic Slowdown?

| March 16, 2020
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Fears over the spread of COVID-19 (coronavirus) have gripped the country and sent stocks in the US and around the world into bear markets. What makes pandemics so much more personal than other crises is how they are felt by everyone, as nearly all major events have been cancelled, major league sports seasons have been postponed, travel restrictions have been put in place, many employees are being sent home to work remotely, planes are empty, and many shoppers are staying away from stores and restaurants.

These significant efforts to contain the outbreak are also the same actions that will have an impact on the US economy.  Just a few short weeks ago, the economic environment was healthy and improving in the US and around the world. Now, as we head into the second quarter, the presence of an economic slowdown is a reality and the odds of a recession are increasing.  That said, in our view markets have largely, if not overly, priced in these recessionary outcomes.

We think some context here is important.  Fear, as a core human emotion, is magnified when situations arise unexpectedly and quickly. In other words, it has been the speed and unexpectedness of recent events that has driven the outsized reaction from the markets.

The silver lining might be that the US economy was looking very healthy before this three-week stretch of steep market declines, with employment strong and the unemployment rate near 50-year lows, and company balance sheets in excellent shape. This bodes well for a faster recovery on the other side of this downturn. Like someone who gets sick, the healthier you are coming into it, the faster you tend to recover.

The investor playbook is always to follow your investment plan. The only thing worse than not having a plan is abandoning the one you already have.

Please stay healthy and contact me if you have any questions or concerns.

Sincerely,

 

Bryan Foronjy, CFP®

Founder and Principal Wealth Manager

Foronjy Financial

CA Insurance Lic. # 0F84170

www.foronjyfinancial.com

 

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Bryan Foronjy is a registered representative with, and securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Strategic Wealth Advisors Group LLC, a registered investment advisor.  Strategic Wealth Advisors Group LLC and Foronjy Financial are separate entities from LPL Financial.

 

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Important Information

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

All data is provided as of March 13, 2020.

This Research material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

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