Keep Your Arms and Legs Inside the Coaster at All Times…
If your equilibrium is still off-kilter, you aren’t alone. The steep drops in the market, coupled with a few bullish opportunity-buying days, have left virtually everyone asking when this ride is going to be over. Several massive moves happened throughout the week, and, after the dust settled, the Dow was actually up 1.7%, while the S&P 500 gained 0.6% and the Nasdaq rose 0.1%. Volume has been light on the big up days and heavy on the down days. Unfortunately, we feel that we will need to see that selling volume dry up before we can “declare” a bottom.
Fears continue to escalate, as investors are growing more concerned about what economic impact the Novel Coronavirus (COVID-19) will have on the global economy moving forward. Travel, leisure and other consumer stocks have already been significantly impacted, because investors worry consumers may curb spending. In an emergency move, not seen since the Great Recession, the Federal Reserve cut interest rates by 0.50% this past week.
Additionally, California and other states declared States of Emergency to prepare for potential outbreaks. These are all valid concerns, with COVID-19 being confirmed in over 30 states. This too shall pass, however, and once selling pressure dries up, there should be a solid foundation for stocks to launch higher. Stocks have not looked this attractive in many years. The 10-year Treasury yield is now under 1%, and the 30-year Treasury yield is below the yield of the S&P 500. This rarely happens!
Also, with the yield curve inverted, the Federal Reserve will likely look to cut key interest rates again. Despite the volatility, this is a very bullish environment for stocks once fears subside. Now is a great time to own a diversified portfolio of quality stocks, bonds, real estate and other alternative investments. Having many assets classes can help you better weather the storm.
Great companies have an uncanny ability to bounce back, and that’s what we’re expecting with the “proud to own” positions at Ambassador. We encourage you to maintain your fortitude and brace for more volatility, and this wild ride winds down. Use this time to reflect on your personal financial goals and working on those aspects of your plan that you can control. There will be better days ahead!
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