Coronavirus & The Markets

It's all we've been hearing about for the past week so I thought now was the time to hear from the experts at PBS's WealthTrack.  What is their take on how coronavirus is likely to impact the global economy and our individual portfolios?  A summary is below.  Use the link to view the full conversation on their web site.  With all the bad news, at least we're finally having a nice weekend.  Enjoy it while it lasts.

S&P falls for seventh day, suffers biggest weekly plunge since 2008 crisis

OMG, the panic selling continued today with the Dow dropping nearly 1100 points in the morning, then rebounded only to drop again in the afternoon, then rebounded only to drop again just before close.  The trigger was again new cases of coronavirus in California and six more countries on four continents falling victim for the first time today.  But then the Fed said it would “act as appropriate” to provide support and that provided sufficient reassurance to trigger a buying spree in the final half hour so that the Dow closed only 357 down, instead of another thousand. But if there’s more bad news over the weekend, there’ll be another bad day on Monday.  The WHO has raised the risk alert now to its most severe category “Very High.”  The next major milestone in this crisis will be if there is an outbreak here in the U.S.  The VIX hit almost 50 today, but settled down to 40 by close.  Volume was extreme at over 19 billion. 

Pandemic fears send investors running as Wall Street confirms correction

Yesterday, the bad news is that there were thousands of people on Long Island suspected of being infected by the virus. Today it was California that reported the first case of unknown origin, though how they can know that is anyone’s guess. How can they possibly know that a victim has not been in contact with someone from the many different countries that have been impacted?  Or for that matter in contact with someone who has been in contact with someone from one of these countries?  However you slice it, this was taken as another turning point in the crisis and the Dow had its greatest one-day plunge in history, down nearly 1200 points.  This was also the fourth 1,000 point decline in history and, worse than that, the second in just this week.  All three indexes are now officially in correction, the fastest one in history. 

Wall Street falls more slowly as investors parse coronavirus fears

The Dow was up almost 500 points in the morning as investors were testing whether the sell off of the last four days had reached bottom.  Then came the news that there were 83 people under quarantine on Long Island, that there were now more new infections outside China than inside China, and that the FDA warned that we were on the path to pandemic.  That’s three strikes and the index dove again, this time to close 123 down.  The good news is that at least the sell off was slowing down considerably.  The consensus per today’s expert, “We need more information [about the virus] before markets have a further correction.”  It was the fifth consecutive day of a sell off.  Volume was again furious at almost 11.9 billion shares traded, but not quite as furious as yesterday. 

Wall Street's sell-off deepens as coronavirus fears intensify

For the fourth straight session, the market has taken a plunge due to the spread of the coronavirus and, in the last three days, that plunge has amounted to over 2,000 points on the Dow.  The WHO is still saying that’s it’s not yet a pandemic but today the CDC has taken the emphatic position that the worst, much worse, is coming to the U.S.  And today TD Ameritrade has said that the impact will go well beyond Q1, probably beyond all of 2020.  So we had another nearly 900 point drop today.  The Nasdaq, Dow and S&P are today each about 8% below their recent record highs achieved just a week or two ago.  Volume was over 12 billion shares, an historic high not seen in 14 months and the VIX briefly went above 30 for the first time since December 2018.  This will continue until there is evidence that the spread of the virus is slowing down. 

Wall Street plunges on fears of coronavirus pandemic

I mentioned in last night’s post that the market was likely to take a dive today due to the breaking weekend news regarding the spread of the coronavirus in Italy and Iran.  And that’s exactly what happened, the biggest one-day drop in two years and only one of three times in the Dow’s history to see the index drop more than a thousand points in one day.  The S&P dropped over 3.3% losing nearly a trillion dollars in one day.  And there is no prognosis for a comeback until we see the virus decelerating.  Also hurting the market was Sunday’s Goldman Sachs report slashing its U.S. growth forecast.  The VIX closed at 25.03, its highest since January of last year,though keep in mind that the VIX historically does not concern us until it goes over 30.  Both the S&P and Dow fell below their 50-day and 100-day moving averages respectively, both gauges of trouble.  And Bernie Sanders’ victory in Nevada this weekend caused the entire health sector to drop.  Nope, no good news today.  Volume was huge at nearly 10.6 billion. 

Succinct Summation of Week’s Events 2.21.20 (plus The Health System We’d Have if Economists Ran Things)

The week's summation is below though I'm not sure the coronavirus being in the "Positives" column is current information given what we learned from China, Japan and South Korea on Friday -- and now also Italy and Iran.  This must have been written before that news broke, news that drove the market down 227 points and is liable to push the market down further tomorrow.  In the "Negatives" column is also an item entirely premature with the author already calling the contest at Sanders vs Trump, based only on weekend polling from Nevada. Hey, the campaign still has a very long way to go.

Choosing Between Bonds and Bond Funds

Tonight I share two recent AAII articles on a topic of interest to all of us  -- what makes the better investment -  individual bonds or bond funds.  The conclusions may surprise you. The first article is a case study comparing the two but it is rather lengthy so I'm including below only the conclusion but with a link to the entire article for those of you brave enough.  The second is a much briefer and more straightforward article by Charles Rothblut in which the title gets right to the point and says it all:  "Choosing Between Bonds and Bond Funds."  This one is included in its entirety and includes a very nice comparison chart that may be worth printing out.  Hope you're all enjoying this very pleasant mild sunny February weekend. 

Coronavirus fears, U.S. business data drag down Wall Street

New cases of coronavirus are up in China … and in South Korea … and in Japan.  This had everybody fleeing the tech sectors and taking safe haven in defensive equities including staples, taking the Dow down 227 points.  All three major indexes took hits for the second consecutive day.  There was also negative economic data with both the services and manufacturing sectors getting low numbers, with services the lowest in 7 years, with manufacturing the lowest in 7 months.  Volume was above average at almost 8.3 billion. 

Wall St. eases, led by tech decline on mounting fears coronavirus could spread

Yesterday China reported fewer new cases of coronavirus and the market zoomed up. Today they reported more new cases and the market tumbled. So the comments from today’s expert should be taken quite seriously, “The market got well ahead of itself. The coronavirus thing is not over by any stretch.”  But there is also truth in the statement that investors were simply taking profits from some of the high flying (and China-sensitive) tech names.  Volume was above average at just over 8.3 billion. 

S&P 500, Nasdaq hit record closing highs, lifted by China stimulus hopes

Three significant things happened today.  1) China reported a decrease in the number of new coronavirus cases; 2) China’s central bank announced stimulus to help stem the tide of economic regress caused by the virus; 3) Our central bank announced cautious optimism about interest rates.  The result: All three indexes jumped, the Dow by 115 points as investors breathe a sigh of relief believing the worst of the virus is behind us.  Apple, which took a beating yesterday recouped almost all of the losses and today there was not quite so much talk about the virus impacting the earnings of high-profile companies.  Volume remains a little below average at 7.2 billion. 

Dow, S&P 500 decline after Apple's sales warning

So this is the way it goes.  Apple is heavily invested in China.  China is under heavy attack from the coronavirus.  Thus, Apple is under heavy attack, heavy enough that today they announced that both production and demand for the iPhone has slowed down due to the virus.  The market is heavily invested in Apple.  So with Apple sinking nearly 2% today, so went the market, the Dow down 165, the tech index down 1.4%.  Volume was a little below average at just over 7.2 billion. 

Happy Presidents Day: George Washington on The History Channel

As the markets are closed today for Presidents Day, I thought I'd find an article giving a tribute to our greatest presidents but was unable to find anything of real worth in the financial or even general media as a celebration of this holiday.  Instead, we will leave the world of journalism and transit to the world of entertainment as I wish to alert everyone to the excellent mini-series "George Washington" that premiered last night on The History Channel.

Succinct Summation for the Week 2.14.20 (plus Your 401(k) Depends on These 7 Stocks)

The weekly summations.  On the credit side, the coronavirus seems to be getting managed and jobless claims rose less than expected.  On the debit side, job openings also rose less than expected.  And the bigger debit: Trump's interference with active criminal cases at the DOJ is undermining the global view, making us look like a Banana Republic.  But I suspect the market will shrug this off.

Investing Is More Luck Than Talent

For your weekend reading I found this article on today's Big Picture blog offering a different perspective on the investment game.  This is pretty much in line with the classic text "A Random Walk Down Wall Street" which took the same thesis that a monkey throwing darts at the stocks page of the newspaper (tells you how long ago the book was written) has about the same success rate as professional fund managers.  Of course this is the polar opposite philosophy that we have that the market can be beaten with skill.  Still, I offer this different perspective as a curiosity item.  Hope you're all enjoying your weekend. 

S&P 500, Nasdaq gain on Nvidia, White House stock incentive report

The Dow took a straight dive down some 140 points until about 2 pm when it began a recovery to close almost even.  The coronavirus has now taken nearly 1400 lives plus 64,000 infected which has put China’s economy in this quarter at its slowest growth since the financial crisis.  But investors largely shrug this off as a temporary situation which will normalize as the outbreak is contained.  A surprise today was a report that the Trump administration may be offering a $10,000 tax incentive for low income earners to invest in the stock market, a move seen to democratize the market which could prove popular.  Otherwise, 387 companies have put in their Q4 reports with 77% beating estimates and the earnings growth estimate has been raised still again, today to 2.6 percent.  Volume was again below average at 6.6 billion. 

Wall Street slips as coronavirus fears mount

Yesterday the news from China was that new cases of coronavirus were diminishing and the market soared.  Today, using new methodologies, it seems that actually the opposite is true – new cases are soaring and the last 24 hours has seen the greatest # of deaths yet.  And the market tanked.  But the WHO offers hope with the statement, “we are not seeing dramatic increases in cases outside of China.”  Investor consensus:  the uncertainties are likely to wane.  Regarding Q4, 378 companies have reported, 71.2% beating expectations, and the earnings growth forecast is now at 2.5 percent.  Volume is below average at 6.8 billion. 

Wall Street sets record closing highs as coronavirus fears subside

It was another big 3-digit day as China reported that, with fewer new cases this week, the coronavirus appears to be running out of steam.  That and the Fed reiterating the policy of being at the ready, closely monitoring all threats, willing to stimulate the economy if need be, and expressing confidence in the sustainability of the economic expansion, now in its 11^th year, all conspired to boost the Dow another 275 points and sending the Nasdaq and S&P to new highs.  351 companies have now put in Q4 reports with over 70% exceeding forecasts, now bringing the Q4 earnings growth to a +2.4%, up from 2.3% on Monday.  Volume remains a tad below average at 7.4 billion. 

S&P 500, Nasdaq eke out new closing highs

When they say the indexes “eked out” new highs, they really mean “eked,” as each of them rose just a few points, except the Dow which closed flat.  But this is really good news as today’s expert points out, “The best thing that could happen for stocks this year is that we go sideways for a while and let the markets catch their breath.”  And catching their breath is what the doctor orders as investors digest election campaign developments as well as the growing coronavirus threat which the WHO today called “public enemy number one,” though China’s chief medical officer said today that the crisis could be over by April as the bug is expected to be killed when the weather warms.  The Fed also reassured investors with Powell remarking today that the economy remains resilient.  Volume remains a little below average at 7.3 billion. 

S&P 500, Nasdaq reach record closing highs; Chinese workers return

After Friday’s sell off, there was another buying spree today that lasted all day and shot the Dow up 174 points.  The coronavirus crisis continues to weigh and, as the WHO said today, that new cases outside of China could be “the spark that becomes a bigger fire.”   But as today’s expert puts it all in perspective, “We’re the cleanest shirt in the dirty laundry, globally, and it gives investors another reason to buy U.S. stocks.”  324 S&P companies have now put in Q4 reports and over 70% have beaten estimates raising the earnings growth forecast now to 2.3 percent.  So since early January, the Q4 estimates have gone from a minus 0.8% to now a plus 2.3%.  (The report below says it started at a minus 0.3% but that’s wrong; I can show you the reports from early January that cited that 0.8% number and did so for several weeks since December.)  But investors must be on edge over the virus since volume was below the 4-week average of 7.6 billion at today’s 6.6 billion. 

Succinct Summations of Week’s Events 2.7.20 (plus Don't Fall For Financial Fraud)

Below again on this weekend's end is the summation for the week, the big positive (besides "Yay! Impeachment is over, and we can all get back to normal!" -- actually I think they're being more than a tad optimistic predicting we'll be getting back to normal anytime soon) but the big positive that really is a positive is new jobs coming in way above forecast.  And the big negative (no surprise) is "Ugh! 9 months of campaigning ahead.")  The unemployment rate rising from 3.5% to 3.6% is also listed as a negative but it should be a positive since the reason it went up is because the job market is going so well that many long-term unemployed who have long since given up are encouraged now and have re-entered the job market.

Here Are the Most Extravagant Things You Can Waste Your Money On

For your weekend reading pleasure, I submit an oldie but goodie from 2-1/2 years ago, the ultimate guilty pleasure on uber-conspicuous consumption. I used to think that the ultimate conspicuous consumption were the wealthy families that built indoor swimming pools in their luxurious mansions, even though they live on the lake, a practice not uncommon in my hometown of Orchard Lake.  Then there was the story of that Arab prince who flew in hundreds of palm trees to line the 20-mile road between his palace and the airport -- in the middle of the desert! And the special underground drip-fed watering system to keep the trees properly hydrated. 

Indexes drop from record highs, but tally strong weekly gains

It was yet another profit-taking day coming off the recent record highs or, as today’s expert put it, “a technical pullback” with the Dow sinking 277 points.  But as the expert also noted, since the coronavirus reared its ugly head, the market has sunk each Friday since investors don’t know what’s going to happen over the weekend.  This should be good news every Thursday for short sellers until this crisis is resolved. The news was otherwise positive.  225,000 jobs were added to the economy last month vs a forecast of 160,000, the Fed has issued a statement that the key risks to the U.S. economy have receded, and the Q4 earnings growth forecast has been increased once again, this time to 2.3 percent.  Volume remains a little below the 4-week average at 7.1 billion shares. 

Wall St. reaches new highs as China moves to limit coronavirus impact

It was quite the choppy day but the Dow still closed up 88 points which made for a new record high and a fourth straight session of gains, namely because China agreed to moderate their tariffs against U.S. goods to boost confidence and filings for unemployment benefits dropped to a nine-month low.  Still, the impact of the coronavirus continues to show up in corporate reports.  But Q4 continues to improve and today the earnings growth forecast was raised to 2.1%, up from 1.6% two days ago.  At 7.3 billion shares traded, volume was quite healthy but still a little below the 4-week average, which has been quite elevated. 

S&P 500, Nasdaq mint record highs after strong U.S. data, waning virus fears

It was almost an exact mirror of yesterday except that instead of starting out 500 up and then dropping to 400, it started at over 200 up and then went up further to 483.  With coronavirus fears waning, 291K new jobs in January (the most in five years) and services activity up, all provided continuing evidence that the moderate economic growth would continue. But before we get too happy, today’s expert reminds us of something we’ve known for years – “There are few alternatives to stocks in this low interest rate environment.”  The market keeps going up because people are more afraid of missing out than they are of a sell-off.  As has been the trend for a week, volume was very high at 8 billion. 

Wall Street jumps as China stimulus measures soothe virus worries

With China’s central bank injecting over 1.7 trillion yuan (over $240 billion) into their economy to stabilize market expectations, the Dow catapulted up over 400 points (at times over 500 points) as investor sentiment was boosted.  Also boosting the markets was new data showing new factory orders increased by the most in 1-1/2 years.  Q4, now roughly half over, continues going so well that the earnings growth forecast has once again been increased.  Yesterday +1.1%, today +1.6%, four weeks ago -0.8%.  That is now officially triple the original forecast.  Volume was very high at 8 billion shares traded. 

Wall Street rebounds from virus fears, helped by factory strength and tech stocks

As today’s expert states, “Historically [referring to coronavirus] these events have proven to be a buying opportunity” And that certainly appears to be what happened today as the Dow zoomed up almost 400 points right out the gate but then almost immediately pared down again but still closed 143 points up. Good news about manufacturing, up after a five month contraction, fueled the buying spree.  Just under half of the S&P has now submitted Q4 reports and the results are sufficiently favorable that the earnings growth forecast has once again been revised upward, this time to 1.1%.  So the forecast has now done a complete 180, starting at a minus 0.8% in early January.  And we’re still not quite halfway there.  Volume was brisk at 7.7 billion. 

Succinct Summation of Week’s Events 1.31.20 (plus R&D spending)

Below is  the usual weekly summation, the main positives being that the impeachment process is drawing to a close (even though depending on one's point of view, this could just as easily be the big negative) and that Q4 GDP rose 2.1 percent.  And the big negative, as before, is that America's standing in the world continues to fall due to all the embarrassing politicking.  The bonus this Sunday is yet another nice graphic.  Yesterday, I posted one about income tax rates in other countries.  Today, this very telling image was posted on the Big Picture blog about how China is quickly catching up with the U.S. on spending on R&D.  And R&D is what drives an economy.  But this same graph also shows that the EU is also not far behind.  One competitor, one ally.  Hope everyone had a great weekend. 

Income Tax Around the World

It is one of most Americans' favorite gripes that we have to pay so much in taxes.  But as the chart below (posted today on The Big Picture blog) clearly demonstrates, most other countries in the world have considerably higher personal income tax rates. We really should be grateful that we get as many benefits as we do in one of the lowest taxed countries in the world.  Even though we're constantly being critical of government for being bloated, inefficient and wasteful, we actually get a pretty big bang for our buck.  Hope everyone's enjoying their weekend.