Stimulus prospects help lift global markets. S&P 500 Index futures hit their “limit up” circuit breaker of 5% overnight following Monday’s losses while major Asian and European indexes posted gains. Extraordinary measures by the Federal Reserve (Fed) to backstop the economy and progress on an approximately $2 trillion fiscal stimulus package by Congress, along with oversold conditions, are the primary drivers of the bounce. While most of the conditions for a durable rebound that we have outlined in our Road to Recovery Playbook have been met, uncertainty remains high, and we know historically that bottoming has been a process.
Purchasing manager indexes start to capture global slowdown. The negative economic data everyone knew was coming is starting to arrive. Markit’s preliminary purchasing managers’ index (PMI) surveys for March showed a historic slowdown in the Eurozone; US data will be released later today. While the manufacturing PMI was surprisingly resilient at 44.8 (below 50 indicates contraction), the services PMI collapsed to 28.4. Recessions historically have started in the manufacturing sector, but the pandemic containment efforts will be felt first on the services side, which will have a strong impact on employment levels in developed economies.
Time in the market versus timing the market. The COVID-19-induced sell-off has caused many investors to wish they had timed the market better and simply avoided the recent volatility. That sounds great in theory, but in practice it is quite hard to do. For instance, the annualized compounded return on the S&P 500 Index from 1990—2019 was 7.7%. If you missed the best day of each year, that return was cut in half, while if you missed the best two days of the year the return was less than 1%. We discuss this important concept for long-term investors today on the LPL Research blog.
Fastest 30% correction in history. It took the S&P 500 a record 16 days to go from new highs to a bear market (down 20% from the highs). Now, another dubious record has been set. It took only 22 days for the S&P 500 to go from new highs to down 30%, topping the previous records from 1929 (31 days) and 1987 (38 days). Studies of human emotion show that fear is heightened when things are both unexpected and fast—like being startled when someone jumps out of the shadows. This is why in times like these it can be so important to stick to long-term investment plans.
“Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, reach for a bucket.” —Warren Buffett
From Our Partners at PAI: The CARES (Coronavirus Aid, Relief, and Economic Security) Act has been a topic of discussion for weeks as legislators discussed the best way to give Americans a much-needed boost as the economy has faltered due to the Coronavirus. Signed into law in late March, there are several provisions that will … Continue reading “CARES Act and Coronavirus Relief”
Factor #1 in our Road to Recovery Playbook is finding confidence in the peak of COVID-19 cases in the United States. At Epic Capital, we are monitoring this factor daily, and we wanted to provide an update into what we are seeing. As shown in the Chart of the Day, while the number of new … Continue reading “Road to Recovery: COVID-19 Case Update”
The big equity bounce has continued, with the S&P 500 Index up more than 17% from the multi-year lows hit last Monday. The big question on many investors’ minds is could this be a bear market rally? After all, some of the most spectacular short-term bounces took place during bear markets.
Market gives up some gains into the weekend. Following the historic run over the past three days, US equities are lower in early trading Friday. The United States now has more confirmed cases of COVID-19 than China, though far fewer deaths. The stimulus package is expected to pass through the House of Representatives today before … Continue reading “Market Update: Friday March 27, 2020”
Epic Capital provides the following comprehensive financial planning and investment management services: Learn More >