Market Update

Originally posted on March 19, 2020

The fundamentals in the financial markets are changing on an hourly basis which makes predicting any type of outcome impossible for the short term.  The coronavirus pandemic is the biggest global event since WWII. 

The US is entering a recession.  We’ve been planning for this in our managed portfolios since the latter part of 2018, but we certainly did not expect the cause to be a virus pandemic.  Virtually everyone’s portfolio has entered this panic sell off with at least half of the money in cash or cash equivalents.  Our best guess right now is that we are probably two-thirds of the way through the downturn but not at the bottom of the financial cycle just yet.

History has shown us on average it has taken 136 days from a market high to the point of entering a recession.  This current cycle went from a bull market to a bear market in only 19 days.

The major unknown is how long is the panic of the virus pandemic going to last?  How long are the economic ramifications going to last?  A key indicator is when the media may throttle back from its panic mode mantra and when the medical professionals have a handle on the virus.

The government’s idea to throw financial assistance at the problem right now may or may not make a difference as panic and fear of the unknown are prevalent.

Some economists are predicting the economic shock to be steep, but short with growth recovering later this year after businesses reopen.  Others are predicting for a longer recovery period.  We feel there are still too many variables to know for certain.

To keep things in perspective, the S&P 500 Index is currently off 22% compared to the 52% decline during the 2008/2009 recession.  Stocks are likely to remain volatile until there is some combination of evidence of successful virus containment and clarity on the net economic impact.

What we know for sure is that this country – its people and its economy – will successfully navigate this crisis.

We are currently monitoring the markets to identify investment sectors that will provide buying opportunities as this crisis begins to stabilize.

At Kapusta Financial Group, we remain committed to putting our clients first.  Please don’t hesitate to contact us with any questions or comments.

This entry was posted in Current Events.