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Coronavirus upstaged the markets’ focus on earnings and economic data

by Fortem Financial January 27, 2020

The potential global impact of the coronavirus upstaged the markets’ focus on earnings and economic data. The deadly virus has spread far beyond its origination in Wuhan China; as of Friday, over 900 cases (including 26 deaths) have been confirmed in 11 countries. On Friday, the unknown reach of the virus triggered a market selloff which was the largest decline since October 8, 2019. For the week, the Russell 2000® Index (‑2.20%) posted the biggest decline followed by the Dow Jones Industrial Average (-1.22%), S&P 500® Index (‑1.03%) and the Nasdaq (-0.79%). The selloff continues today, but if history is any clue, we would anticipate there will ultimately be a “go buy ‘em” moment.

Health officials in China have imposed travel restrictions effecting 36 million residents in ten cities. Precautions in preparation for Saturday’s Lunar New Year holiday include the indefinite closure of Shanghai Disneyland. The World Health Organization, citing insufficient data, declined to designate the virus a global health emergency; nevertheless, health officials in the U.S. are speeding testing to contain the spread. Some economists estimate that the virus may lower China’s GDP by one percent. Meanwhile, the International Monetary Fund raised its estimate of global GDP growth from 2.9% in 2019 to 3.3% in 2020.

Earnings season continued last week with Technology companies International Business Machines and Intel reported higher revenues and earnings. Mid-cap banks East West Bancorp and Signature Bank reported strong earnings growth (up 12% and 4%, respectively) despite lower interest rates. So far, 16% of companies in the S&P Index have reported quarterly results; of these, 70% reported better-than-expected earnings. Reports this week include Apple, Starbucks, Microsoft and Facebook.

The reach of the coronavirus extended to gold, oil and U.S. Treasuries; near-term, the virus will continue to cloud the markets until health officials are able to contain its spread. The markets will then refocus on economic data and corporate earnings.

Source: Pacific Global Management Investment Company

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

 

Sincerely,

Fortem Financial
760-206-8500
team@fortemfin.com

 

 

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The Five Star Wealth Manager award is based on 10 eligibility and evaluation criteria: 1) Credentialed as an investment advisory representative (IAR) or a registered investment advisor; 2) Actively employed as a credentialed professional in the financial services industry for a minimum of five years; 3) Favorable regulatory and complaint history review; 4) Fulfilled their firm review based on internal firm standards; 5) Accepting new clients; 6) One-year client retention rate; 7) Five-year client retention rate; 8) Non-institutionalized discretionary and/or non-discretionary client assets administered; 9) Number of client households served; and 10) Educational and professional designations. The inclusion of a wealth manager on the Five Star Wealth Manager list should not be construed as an endorsement of the wealth manager by Five Star Professional or the magazine. The award methodology does not evaluate the quality of services provided. Additional information about this award is available at: fivestarprofessional.com/2016FiveStarWealthManagerMethodology.pdf
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Data Sources: News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market Data: Based on reported data in WSJ Market Data Center (indexes); U.S. Treasury (Treasury Yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness.

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The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighed index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indices listed are unmanaged and are not available for direct investment.

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