The roller coaster ride in the stock market continued this week caused by more uncertainty of the economic impact of the coronavirus, along with results of the “Super Tuesday” Democratic primary.
The Dow Jones Industrial Average (the Dow) has dropped by about 4.5% over the last two days, but is about flat for the week. The market reacted positively when the more moderate Democratic candidate, Joe Biden, did better than expected in Tuesday’s primary results and the Dow was up over 1,000 points. Then, on Wednesday, the Federal Reserve announced an unexpected interest rate cut of a half-percentage point. However, investors seemed to focus on the statement issued by the Federal Reserve that cited more “evolving risks” to the U.S. economy related to the coronavirus, and the Dow dropped by nearly 1,000 points.
The coronavirus continues to spread across the globe with now over 100,000 people infected. Congress acted this week by passing an $8.3 billion spending package to combat the spread of the virus. Some good news is that the numbers of new infections in China appear to be dropping and over 55,000 people have recovered from the virus worldwide. However, there are signs that the virus is having an increasing influence on U.S. company earnings which the stock market is concentrating on. There is no doubt that economic growth will be significantly affected for at least the first half of the year.
We have been proactive in positioning our clients’ portfolios for a potential market drop by increasing our high-quality stock positions that are more resilient to economic downturns. In addition, we have added more high-quality, short-term bonds that can provide safety during these times. We will continue to look for ways to improve our investment strategies and take advantage of this market volatility. If the stock market continues to fall, we will consider buying more inexpensive stocks. Our investment committee members are meeting regularly to review the options.
This level of market volatility can really test an investor’s tolerance for investment risk. Syverson Strege clients should not hesitate to reach out to their financial planning team at Syverson Strege.