Volatility as Saudi Arabia Piles On

March 9, 2020

Market Update, 20-20-03-09: Last week US equity markets experienced significant intraweek volatility but ended the week slightly higher overall. Realized volatility of the S&P 500 has not been as high as it has over the past 10 days since the U.S. credit rating downgrade in 2011.

Covid’s influence

Last week, domestic news surrounding the Covid-19 virus overshadowed better news in China on that front. Domestic news surrounding Covid-19 was the factor behind volatility and most everything we saw in financial markets last week. That includes the massive rally in Treasury bond yields.

Coincidence or not, daily stock market moves have tracked the change in daily reported cases outside of China, without fail. The concern is that, if the market is truly keyed in on how the virus is spreading outside China, we are almost certainly some time away from seeing daily cases decelerate. https://www.worldometers.info/coronavirus/

Federal Reserve adds to volatility

The Federal Reserve probably didn’t help uncertainty by cutting interest rates by 50 bps intermeeting. This left investor wondering “What do they know that we don’t?” volatilityStocks fell sharply on the day despite the aggressive move before rebounding the next day. But, keep in mind that the Fed already signaled over a week ago Friday that a move was imminent. Through last Friday, stocks had corrected 12.5% in less than 2 weeks, on par with the other two large Virus declines the last 20 years.

Volatility spikes at Saudi Arabia’s move

This morning, U.S. equity futures are down over 5% on another large spike in volatility. This time, Saudi Arabia’s Saturday announcement of abandoning any effort to prop up oil prices after the collapse of OPEC talks with Russia, spooked the markets.  “On the back of this, oil prices dropped over 20% (the biggest drop since the first Gulf War), sitting around $32–35 currently.” Read more on this development here.

Energy

Overall portfolios at OHFG hold very few energy names. The largest overall energy holding at OHFG sits outside of the top 30 of the company’s total holdings. That being said the majority of our clients are residents of Texas and clearly a oil price down here will slow our economy in addition to the abrupt slowdown being caused by the economic affects of the virus domestically.

Customized investment and retirement plans

The team at Oak Harvest stands with our clients in developing customized and unique investment and retirement plans. We use many financial tools including public equities. Some of these are inherently volatile. But, when combined with other tools that do not have equity market exposure, these might be used to best meet your retirement goals as part of a total package.

Resources

Below we have some additional articles that our readers might find of interest and enlightening during the on-going significant spike in volatility.  We do not know how long this market volatility will continue. Nor when or where the ultimate lows of the market will be. But we continue to believe in the growth of the US economy  and therefore the compounding in stocks over longer holding periods. Here are those articles:

Also:

  • Check out these helpful podcasts by Chris Perras, CFA®, here.

Weekly market updates contain general information and expresses views of Oak Harvest Investment Services. Data, Articles, and information cited are believed to be reliable at the time of creation, but is not guaranteed. Content should not be regarded as personalized investment advice. Views and opinions expressed may change without notice and do not constitute a recommendation, or an offer or solicitation to buy or sell securities. In addition, Oak Harvest makes no assurance as to the accuracy of any forecast made. Past performance is not indicative of future results. Investing involves the risk of loss.