Last week was one of the worst in the history of the stock market, with the S&P 500 Index losing more than 11%, for its worst week since October 2008. Sparking the fear and selling were concerns over COVID-19 or the coronavirus as most know it. “Markets hate uncertainty, and global investors took a sell-first-and-ask-questions-later mentality,” explained LPL Financial Senior Market Strategist Ryan Detrick. “We just don’t know how bad this will get.”
While we certainly do not want to be dismissive of the tragic loss of life, amid the unnerving market volatility, there are some positives worth noting:
- Only two stocks in the S&P 500 finished in the green last week, and the same two are the only two currently above their 10-day moving average. This indicates a historic level of oversold conditions that suggests we may be ripe for a bounce. We just need some good news—or at least for the news to get less bad.
- Copper hasn’t broken beneath its levels from last fall, suggesting some potential positive economic developments under the surface.
- As shown in the LPL Chart of the Day, the next two months historically have been the two strongest months for the S&P 500 over the past 20 years.
- Last week, China and Hong Kong stock markets were the two strongest in the world. Given this is where the outbreak started, maybe some of the worst is finally being priced in.
- Credit markets are still calm, suggesting a very savvy part of the market isn’t yet concerned with a coming recession.
- The S&P 500 has pulled back 12.8% from peak-to-trough in 2020, joining 20 other years since 1980 to see at least a 10% correction during the year. The good news? Thirteen of those years managed to finish positive.
- Last, as bad as it was for stocks, bonds had a tremendous week, with the Barclays Aggregate Bond Index making new all-time highs and having its best week in nearly five years. Investors with a diversified portfolio will have appreciated their bond allocations for doing their job managing downside risk during these rough times.
With fears running high, we will continue to provide consitent and accurate analysis of a very concerning situation. For more of our immediate thoughts on the coronavirus and what it means for stocks and the economy, please read Weekly Market Comentary: Coronavirus Fears Intensify (insert link to WMC).
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