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Our Latest Insights on COVID-19

Update on Market Volatility

4/21/2020

I hope this finds you and your loved ones safe and healthy.

The continued movement in the markets, paired with all the economic headlines you see daily, can leave you searching for facts to try and make sense out of all the information we see and hear. So, we wanted to provide further insight into the market data we have available. It’s been about two months since the S&P 500 hit an all-time high, and about one month since it hit a low we have not seen since 2017. This made March the most volatile month in U.S. history and the S&P 500’s 34% drop be­tween February 19 and March 23 the fastest decline from a record bull market to a bear mar­ket. Thanks to a massive government stimuli package, combined with some specks of COVID-19 relief on the horizon, the markets have rallied the last few weeks. The S&P 500 is now just 15% below its pre-pandemic high and the Nasdaq 100 is positive (1.1%), as of Friday, April 17.

Furthermore, earnings season kicked off last week giving a glimpse into how the pandemic affected the financials of key corporations during the first quarter, with many companies even stating their expectations for the rest of 2020. The markets showed optimism last week for two potential reasons:

  • Talk of steps to begin to reopen the economy; and
  • Flattening of the curve of new COVID-19 cases, as seen in the graph below.

While it may take some time for uncertainty to subside, based on the progress above, our firm remains long-term optimistic.

Fear and hope amplify most of the strong market movements we’ve seen, especially given the amount we still don’t know around how to reconcile the im­pact of the Coro­n­avirus pan­demic on the pop­u­la­tion and econ­omy. Rather than fear or hope, our firm remains disciplined and focused on the long-term investment horizon and your financial goals.

Thank you for your continued trust and confidence in our relationship. We remain available to you and your family however we can help. Most importantly, we hope you and your family stay safe.

Sincerely,

The Bailey Group's Financial Services Team


The source for data from prior day’s end is the “European CDC – Latest Situation Update Worldwide.”  Data for U.S. State and intraday measures is https://www.worldometers.info/coronavirus.

The source for any S&P 500 Index (Daily) Data, will be Yahoo Finance (^GSPC). It will be shown assuming historical dividends are reinvested and in U.S. Dollar terms.

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. Comments concerning the past performance are not intended to be forward looking and should not be viewed as an indication of future results.

Update on Market Volatility

3/17/2020

Last Thursday was the worst day on the market since 1987. The very next day was the best day on the market since 2008. On Monday this week, the S&P declined 12%, down almost 30% from its all-time high.

There are many questions we’re all looking for answers to as we see this pandemic start to affect our lives: travel bans, virtual education, Tom Hanks, the cancellation of March Madness, and family conversations about what grocery items to stockpile. “We live in interesting times” can often be a cliché, but there is nothing banal about the current state of affairs.

We know the COVID-19 pandemic is causing disruptions and distractions for you and your family, one of which is the market’s impact on your wealth. We are actively monitoring the situation and while our imagination never could have anticipated this, our approach to managing investments does consider the possibility of moments of extreme volatility such as now.

The markets are rapidly evolving but here a few points on how Monday ended to set the context for this week:

  • Year-to-date, the S&P 500 is negative 26%
  • 10-year Treasury Rate is around 0.75%, after the Fed cuts rates to nearly zero
  • The VIX, which gauges expected market volatility, closed on Monday above 80, with its long term average around 19
  • Price of US crude oil fell to below $30, its sharpest decline since the first Gulf War in 1991

The best way to contain the spread of Coronavirus is to reduce travel, increase social distancing, stay home, and eliminate large gatherings; all of which lead to a decline in economic activity and an increased probability of a recession. For this reason and since the pandemic is still in early stages, we expect the markets to remain volatile until there is more clarity around: 1) successful virus containment, 2) understanding the net economic impact, and 3) an organized policy response.

Stock market ups and downs can be unsettling, especially when fear, uncertainty, and headlines are driving market movements, rather than actual economic data or company performance. Count on us to look beyond this short-term volatility and remain focused on facts (not hype), long-term investments, and your financial goals.

We are optimistic that this too shall pass and while past performance does not mean the same will happen in the future, history shows us that staying invested can have benefits as every downturn has been followed by a recovery. The graph attached illustrates the short-term and long-term market reactions to epidemics over the past 40 years.

Thank you for your continued trust and confidence in our relationship. We will continue to assess the situation and remain available to you and your family however we can be helpful. Most importantly, we hope you and your family stay safe.

Sincerely,

The Bailey Group's Financial Services Team


The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. Comments concerning the past performance are not intended to be forward looking and should not be viewed as an indication of future results.

The S&P 500 is an unmanaged index of 500 widely held securities. The CBOE Volatility Index® (VIX® Index®) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. You cannot invest directly in an index. Treasury Bills are certificates reflecting short-term (under one year) obligations of the U.S. government.