A note from my Adviser:
Over the past four market days the S&P 500 has dropped over 250 points wiping out over $1.7T in market value on fears of the spreading COVID-19 virus. Thats $1.7 Trillion with a T. There are many people who are very sick, some have died, and there is a real risk that the number of cases in the U.S. may expand.
Putting the market sell-off in perspective, to this point, we are about 8% off the markets all-time high. Almost every year, we have a catalyst that causes a 10% market correction. In my February 15th email, I pointed out that markets were expensive, in relation to expected earnings. I had been trimming equity exposure. Portfolios were overweight cash before the sell-off began. We have all heard the advice to buy low and sell high. You can only buy low if you have cash.
The market sell-off may continue. Although it sometimes seems that markets go up and down without rhyme or reason, at the end of the day, it eventually comes back to economic fundamentals. Markets do not like uncertainty. It is becoming more apparent that the economic impact of the COVID-19 virus will be broader than earlier believed. Until we get some clarity regarding the path of the virus and the full economic impact, market volatility and weakness may continue.
Today I reduced exposure to the financial sector. As equity markets have fallen, so have bond yields. The odds of further intervention by central banks has risen, putting more pressure on yields. Lower bond yields are a headwind for banks.
