Market Update: Coronavirus

By Morgan Christen
CFA, CFP, CDFA, MBA, CEO and CIO

The market finally awakened; it’s amazing how long it was devoid of any reaction. There is a legitimate concern supply chains with China could dry up as well as concerns this could lead to a global recession.

Because of these concerns as well as the market instability, there is tremendous pressure on the Fed as well as worldwide central banks to stimulate. While central bank stimulation will not help the supply chain issues, it could halt the slide in equities.

There are over 83,000 active Coronavirus cases and over 2,800 deaths worldwide (Worldometer). The report shows active cases are slowing and impacting those that are already compromised. We do not want to gloss over the impact or the deaths, but for perspective, the common flu is responsible for over 10,000 deaths per year.

Back in 2003, there was a 38-day trading period during the SARS outbreak when the S&P 500 fell by 12.8%. The end of 2015 through 2016 there was the Zika virus and the market fell 12.9%. During those and others like them, the market recovered and pushed to new highs.

Is this an overreaction? Maybe or maybe not. There is a fear of the dark, and we understand that. Many companies are not reporting earnings as they are unsure. We believe the reduction in earnings and slowdown in economic activity will not persist. It will have an impact, but we believe the current slowdown should be made up in the next couple of quarters.

When you look at the television and listen to the news, the drop sounds bad, and it is. However, most of our clients have a healthy allocation to bonds that are holding up quite well. Diversification works. Many stocks and sectors are starting to look attractive. Buy-in opportunities will present themselves. This is a correction and historically corrections have a V shaped recovery.

The online firm Betterment studied the Dow in 2019. What they found was that those who sold after the massive August drop and never returned saw their annual returns cut in half versus those who stay put.

Keep your heading and stay the course.

 

On another note…

Google “what is a spinnaker used for” and you will read that a spinnaker is a sail designed specifically for sailing off the wind from a reaching course to a downwind, i.e. with the wind 90-180 degrees off bow.

The spinnaker fills with wind and balloons out in front of the boat when it is deployed, called flying. Basically, a spinnaker is used when you are heading downwind in calm water. Without a spinnaker, moving downwind can be the slowest part of a race.

Did You Know?

We have been asked before why we chose the name Spinnaker Investment Group. Financial service companies usually look to trees, a compass or nautical reference (we are better at numbers, not creativity).

When we sat down and decided what kind of a firm we would launch, we wanted a firm that was boutique, high-touch and one that would help our clients move forward. We had a basic belief that we would build a firm looking through the eyes of our clients’ needs and goals. What can we do to make your life easier and more productive? If we could do that, good would follow.

The purpose of this note is to highlight some areas Spinnaker assists our clients that may not be widely known.

  1. Did you know that we can run a full financial plan for you? A great way to assess your current situation and give you a good course to financial freedom. They say when climbing Mt. Everest, most accidents happen on the way down. Spinnaker can run scenarios to create calm in bumpy markets.
  2. Did you know we have in-house advisors that can assist with your insurance needs? We offer life, health, long-term care and disability. If you need homeowners or business insurance, we can offer you a referral to people we trust.
  3. Have you utilized our client portal? The portal will not only show your holdings and performance, but it can be used to upload documents and as an aggregator for all your accounts (including those held outside of Spinnaker). Not only can you access the portal through your computer, but we also have an app for your convenience.
  4. Have a child or grandchild you would like to teach about saving/investing? We have created models that can start with a minimum of $5,000. If you are looking to save for college, we can also help set up a no-fee 529 account.

Coming Soon: The launch of our SpinnCycle

This program will be a great resource to explain what and how we help our clients achieve their goals. It is a simple analytical tool that is a great resource for friends, family or coworkers inquiring about financial service and advice they deserve. This interactive questionnaire will be live on our website (coming soon) and we invite you to share.

We are humbled you have entrusted us to manage your finances and we take that very seriously. We continue to add to our services and expand our offering to help our clients.

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