The last week of February was definitely newsworthy and exciting, but not at all in a good way for the stock market. Virus fears along with the associated economic impact became the main preoccupations of the markets.

In my experience, we must be more cautious when most things appear certain (and therefore priced for perfection….think December and January) and we should be more aggressive when things appear most uncertain (and therefore priced cheaply) . But this is not to say that the markets can’t go lower. Even though I personally believe the negative impact of the COVID-19 outbreak on the stock markets is close to its peak and will begin to dissipate over the next two months, I’m not sure the market has fully factored in the real possibility of a Bernie Sanders Presidency.

………..

I thought the following observations & numbers provided to me by a Fidelity Investments representative yesterday was fairly interesting:

“After a crazy week in global markets, I think it’s a good opportunity to take a step back and look at the bigger picture. Earlier this week we were at an internal conference and we heard from a lot of our Portfolio Managers in regard to the recent impact of the Coronavirus. Surprisingly, the tone was positive. I think the overarching theme was that their long term outlook has not changed and that the short term volatility has been a huge buying opportunity. Many of our PMs said they have bought a lot of stocks over the past couple of days as valuations look attractive at these lower levels.

 

Let’s take a look at how markets have behaved following past outbreaks. Although no two outbreaks are the same, we can learn a lot about how resilient markets have been”:

See disclaimer below

 

I received a communication this morning from Greg Valliere, a highly respected U.S. Policy Strategist working for AGF Investments, providing an interesting positive spin on the recent carnage. He believes that (1) the U.S. Federal Reserve will be forced cut interest rates in the U.S generally a positive for the markets, (2) the increased popularity of Bernie Sanders might end up being good for the stock market, (3) the market was due for a sell off anyway since December and January were very strong months, and (4) we may see some significant medical breakthroughs over the next 18 months.

 

Wade Brown

February 28, 2020

 

 

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