Friday March 6th, 2020
It was another week full of headlines- the Federal Reserve lowered interest rates, there were new developments in the Democratic primaries and, of course, the daily and seemingly minute by minute updates of coronavirus (COVID-19).
One bit of good news that may have been missed was another strong assessment of the U.S. labor market. In a monthly report published by the U.S. Department of Labor, employers added 273,000 new jobs in February, nearly 100,000 more jobs than economists had projected. In addition, the report marked the unemployment rate at 3.5%.
While this report likely doesn’t capture any future disruption caused by COVID-19, it does, in our opinion, indicate the economy and consumer are starting on solid footing. Over the coming month(s) it seems reasonable to expect the virus will have some impact on consumer sentiment and economic growth. As more data becomes available, it should aid financial markets and economists to better quantify the impact, particularly on second and third-quarter economic growth, rather than merely speculating.
Moreover, slowing economic growth is something we’ve observed during this current expansion. For example, the U.S. economy experienced two-quarters of negative economic growth in 2011, a quarter of negative economic growth in 2014 and saw economic growth slow to near zero by the end of 2015. Quarter to quarter variance in economic growth rates isn’t unusual, so long it reflects temporary conditions rather than more durable supply/demand imbalances. We continue to look at controlling what we can- such as maintaining diversified portfolios to help mitigate volatility and keeping our office and clients healthy by sanitizing common spaces regularly, making hand sanitizers available in meeting rooms and utilizing virtual meetings where possible.
Friday February 28th, 2020
Since our last communication on Monday, global financial market volatility has continued to persist.
The uncertainty created by coronavirus and the resulting uncertainty over its spread and containment have seemingly created the perfect combination of fear, uncertainty and anxiety necessary to facilitate the market declines observed over the past week.
Whether you’re new to investing or an individual with more experience, you may be feeling some of these emotions as well. These are normal feelings to have. In our opinion, such market declines are likely attributed more to emotion rather than rationality.
As a firm, we typically recommend a disciplined approach to investing through diversification. This means that during periods of strong market returns some upside potential is usually sacrificed as a way to provide some relief in more volatile times, such as those we are currently experiencing. Simply put, diversification is an all-weather approach. Much like all-season tires on a car, some performance is sacrificed so that adequate traction can be maintained during stormy weather.
It’s difficult for anyone to forecast when the current volatility may subside but history has shown that eventually it will. If you would like to understand how these events may impact your long-term goals, please reach out to your planning team.
Monday February 24th, 2020
Today was a volatile day for financial markets with the S&P 500 falling more than 3%. The day’s decline seems largely attributed to headline risk regarding uncertainty around the coronavirus.
Despite the stock market reaction, the World Health Organization earlier today stated the coronavirus is ‘not a pandemic’ and is ‘not spreading in an uncontained way’. For additional context, the World Health Organization notes there are 78,811 confirmed cases and 2,462 deaths resulting from the coronavirus, with about 98% of those cases concentrated in China. For comparison, the Center for Disease Control which tracks seasonal influenza within the United States, indicates there have been at least 29 million cases of the flu so far this season, resulting in 16,000 deaths and 280,000 hospitalizations.
This isn’t to downplay the impact of coronavirus but we do think it provides some appropriate context. Economists expect Chinese GDP growth will slow during the quarter as a result of the virus but anticipate growth re-accelerating as the year progresses. Within the United States, high inventory levels may provide some cushion from short-term supply disruptions. According to Wells Fargo Economics, the computer and electronic industry in the United Stated receives about 10% of its inputs from China.
Over the past two decades there have been numerous global health worries- Ebola, Zika, Swine Flu, Avian Flu and SARS. If history is any guide, absent a pandemic, volatility and GDP disruption resulting exclusively from coronavirus will likely be temporary.
Disclosure: Marshall Financial Group, Inc. is an SEC registered investment adviser headquartered in Doylestown, Pennsylvania. A copy of our disclosure brochure as set forth on Form ADV is available at www.adviserinfo.sec.gov. Nothing herein should be constructed as a solicitation or attempt to effect transactions in securities, or the rendering of personalized investment advice.