2/25/20 Market Notes
A much worse than previously reported spread of the coronavirus caused stocks to sell off sharply to start the week. The Dow Jones Industrial Average ended more than 1,000 points lower, as the S&P 500 and NASDAQ recorded similar 3 ½% losses. The Technology, Energy and Consumer Discretionary sectors were the worst performers as they have the greatest supply chain risks, while the relatively defensive Utilities and Real Estate sectors outperformed on a relative basis. Oil prices declined by more than 4%, while the U.S. dollar was mixed. The benchmark Ten Year Treasury yield declined to a three year low, ending at 1.37%. Based on reports from various contagious disease experts, it is likely that the worst of the coronavirus is yet to come. As such, we continue to work to better understand the economic impact of the virus both globally and domestically. And, while the sell-off is unnerving and might continue as a result of market participants repricing shares to reflect a slower economic growth environment, we continue to believe stocks could end the year with strong single digit gains. Most importantly, we believe that our strategy of investing in companies with a solid balance sheet, superior earnings visibility, low levels of leverage and compounding returns through dividend increases and / or share buybacks, will not only experience lower levels of volatility, but ultimately also offer better overall portfolio performance. European shares sold off by more than 4 ½% on Monday, declining a further 1% overnight. Asian shares only lost a fraction of a percent on Monday, and, with the notable exception of the Nikkei which is down over 4%, are only off slightly in overnight trading. Premarket U.S. equity futures had indicated a solid rebound, but have relinquished those gains to point to a lower open as of 6:00 AM EST.
Disclosures: This market commentary is written by the 1879 Advisors and represents the views of 1879 Advisors. This commentary is not investment advice and should not be used as a basis to make investment decisions. Please consult with your registered investment advisor before making any investment decisions.