Broker Check

Out of the Blocks

February 14, 2020

Since our last market blog, the stories that drive the market have shifted drastically.  While trade news and interest rates have begun to settle into a status quo, new developments have gone viral (pun intended).  At the end of January the now well-known Coronavirus started swaying market sentiment.  The breakout of the virus in China and internationally drove the volatility index to levels not seen since October of last year.  One thing we have learned over our years of watching market movements is that the pullback you are waiting for never quite looks exactly how you planned it. In other words, the stories that cause it are never what you expect them to be, and the courage it takes to step in and buy that dip is always more difficult to follow through on when the moment arrives rather than when you’re analyzing it in your head. 

While the initial number of cases and spread of the virus caused some heavy market jitters, those have since waned with the S & P 500 rallying back and printing new all time highs within the last day.  Easy monetary policy, settling trade negotiations, and an acquittal for President Trump have all overtaken whatever virus fears there were at least for the time being. Communist China has changed the way they are reporting cases of the virus, reducing the number of infections per day.  While we do not know if these numbers can be trusted, it seems the virus is, at least for now, contained from spreading to much of the US. 

When digesting what sectors and companies are performing the best in the market at the moment, we have seen some solid results from the technology sector, and many other consumer segments. Oil prices declined drastically to start the year as usage levels are expected to drop around the world with the fear of coronavirus to blame. Prices are trying to stabilize around support at $51/per barrel, down from the $60 per barrel range we saw last year. Materials have been strong as we start the year with large gains coming from companies like Albermarle.  Biotechnology companies have also started the year off strong.

While we would like to be cautious about the markets overbought conditions here, it is hard to sit on the sidelines while the stock market squeaks out new highs.  Therefore, we are positioning ourselves within individual stocks that we believe could outperform during the current economic backdrop rather than investing heavily into market weighted mutual funds or etf’s.  Individual stocks could buck the trend of a pullback if the company windfalls are positive relative to the overall market direction. These stocks also allow us to be nimble with entries and exits should the economic indicators begin to roll over during some point of the year.