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Coronavirus weighs on market

by Fortem Financial February 3, 2020

This week, uncertainties related to the global economic impact of the coronavirus overwhelmed the markets; the virus, first discovered in Wuhan China, has spread to at least 18 countries with almost 10,000 confirmed cases including 213 deaths. On Thursday, the World Health Organization declared an international health emergency; on Friday, the U.S. declared the virus a public health emergency. Friday’s 603 point selloff in the Dow Jones Industrial Average marked the largest one-day decline in the Dow since last August’s tariff-related selloff. The CBOE Volatility Index jumped 21%. The late month selling turned a promising month into a disappointment as the “risk off” sentiment led weekly declines for the Russell 2000® (-2.90%) followed by the Dow Jones Industrial Average (-2.53%), the S&P 500® (‑2.12%) and the Nasdaq (-1.76%).

Many countries imposed travel restrictions and quarantines for individuals returning from China. Airlines including Delta and American announced flight cancellations to China until later in the spring. Several U.S. drug companies are actively working with the National Institutes of Health on vaccines and treatments; the pharmaceutical companies hope to begin human trials by April. Concerns related to weakened demand touched most sectors, including, most significantly, the Energy and Industrial sectors. OPEC has indicated that it will advance its March meeting to February to discuss additional production cuts to prevent a further erosion in oil prices.

Revenue and earnings results for Apple, Microsoft, Amazon and Tesla exceeded expectations; the results highlight the strength of consumer spending even as business spending remains weak. Corporate commentaries suggest that business spending will increase later in the year; the build-up from today’s low inventory levels should provide an economic catalyst. The initial estimate of fourth quarter GDP, 2.1%, matched the third quarter results and exceeded estimates of 1.9%. For 2019, the 2.3% GDP rate was the slowest since 2016.

The uncertainty over the coronavirus will likely weigh on the equity markets. Trading volumes remain high for companies with specific news; otherwise, trading activity is unusually low as many investors await more information. Typically, the markets react strongly to unforeseen events before recovering over time.

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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