Thaw up and coming

Weekly Market Update, 2020-04-06. S&P 500 futures are up nearly 4% pre-opening this morning. This thaw would erase last week’s 2.1% decrease and chip away at the YTD loss of 23%. The 10-year Treasury rate is up 7 bps to 0.67%, retracing a good portion of last week’s decline.

Virus declining

Risk sentiment is positive as markets thaw and start the week moving up as the global number of coronavirus cases and deaths slowed over the weekend. As mentioned for the past week, but largely ignored by the financial press, in crisis-stricken Europe, Italy, Spain and France case counts peaked.

Here in the states, New York state reported its first daily decline in fatalities. Governor Cuomo pulled forward New York’s peak virus outlook from month-end April to mid-Easter week.

Thaw in crude talks

After jumping 32% last week on optimism that Saudi Arabia and Russia might agree to reduce crude output by about 10 million barrels per day, oil prices are down 4% to $27.2 on news that OPEC+ officials have delayed a meeting that was scheduled for today until Thursday amid a renewed dispute over production cuts.

Hold to your plan

We want to reemphasize the importance of remembering your particular financial plan and investment allocation. Your plan is based on your goals, risk tolerance, and time horizon, and is constructed with the knowledge that there are going to be periods of extended market decline. It is a part of being a long-term investor.

Everyone is going to feel fear when the stock market dips into bear market territory as it currently is. That’s completely normal, and it’s why your advisor and the investment team at Oak Harvest are here. We are here to help you deal with that emotional rollercoaster, and to prevent long-term investment decision making based on short-term events, fear, or panic. We remain committed to making the best investment decisions for our clients on a daily basis.

Thaw and participate: Time in the market, not timing the market

Frozen on the sidelines? Time to thaw. Once again, readers please remember, its “time in the market”, not “timing the market” that matters to longer term equity returns and accomplishing your financial plan. We have highlighted this topic many times.

There is a rapid decline in total annualized return if an investor misses as few as the best 10 days in the market or as many as the best 70 days. Returns drop from averaging a little over 9% per year to under 7% per year. If you miss the best 70 days in the market? Your annualized return actually goes negative.

Virus vs. volatility

Below we show one of the behind the scenes metrics we’ve been seeing. This has had us slowly purchasing equities, particularly dividend growth focused entities, for our clients. It is an overlay of stock market volatility and the number of countries globally that have a daily virus case rate exceeding 10%.

It looks like a pretty tight fit to the team at OHFG. The country case momentum peaked late the week of March 19. Stock market volatility, while remaining high, seems to have peaked then as well. Not surprisingly, so far, that corresponds to the short term lows in the stock markets.

Resources

• “State Coronavirus Shutdowns Have Taken 29% of U.S. Economy Offline,” Wall Street Journal article.
• Find more information and help on our YouTube Channel.
• Check out these helpful podcasts by Chris Perras, CFA®, here.

 

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