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Corona Virus Market Volatility

February 28, 2020 -         Recent Market Volatility

What’s Going On?

This last week was a brutal week for the markets.  As of the time writing, the S&P500 is down a little over 300 points in 5 days or a little over 10%.  The question on everyone’s mind is what do I do now?!?

Why is it Happening?

Let’s start with what is causing the market volatility.  There are two main culprits with the same underlying cause:  Corona Virus or Covid19.  The first is uncertainty – THE MARKET HATES UNCERTAINTY.  We have seen the fear/greed index spike towards fear.  The second is companies providing warning about earnings.  The warnings stem from concerns around risks to supply chain interruption, reduced travel/tourism, & fear that consumers will stop spending money.

Uncertainty – when the market faces great uncertainty, it attempts to price all available information (strong market hypothesis) into the current price.  Once we know how bad the Corona Virus outbreak will be then the uncertainty goes away and markets stabilize.  Thus as long as we continue to see worsening conditions and bad news, I expect to see high volatility especially on the downside.

Earnings fears – at its core, the stock market price is the value of all future earnings.  If earnings expectations go down, then the value of the market should go down.

What to do?

Now that we understand the major factors of affecting the market, what should we do?  The easy answer is it depends upon your situation.   Money that is needed in the short term should not be in the market.  In the long term, it is likely for this event, or any other, to be a blip on the map.   Provided that we have the time to allow the recovery to occur, we are in good shape.  It’s important to remember that some of the most expensive words are, “this time it’s different.”  There is never a shortage of people trying to convince us that this time it is different – whether the market is heading up or down. -Alex Collins

 

Alex Collins is a Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). OSJ: 3585 Maple St #140, Ventura, CA 909-399-1100. Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is a wholly-owned subsidiary of Guardian. Quantified Financial Partners is not an affiliate or subsidiary of PAS or Guardian. This material contains the current opinions of the author but not necessarily those of Guardian or its subsidiaries and such opinions are subject to change without notice. Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation. S&P 500 Index is a market index generally considered representative of the stock market as a whole. The index focuses on the large-cap segment of the U.S. equities market. Indices are unmanaged, and one cannot invest directly in an index. Past performance is not a guarantee of future results. AR license #7264699 CA License #OH24806 #2020-96256 Exp 03/2022