Stocks fell sharply last week as Wall Street considered how the coronavirus outbreak might influence global business activity and household spending.

The selloff became a correction for the U.S. markets. The S&P 500 retreated 11.49%; the Dow Jones Industrial Average, 12.36%; the Nasdaq Composite, 10.54%. The MSCI EAFE, tracking developed stock markets outside North America, had fallen 6.75% week-over-week by Friday’s closing bell.

On Friday afternoon, Federal Reserve Chair Jerome Powell stated that central bank officials were willing to “use our tools and act as appropriate to support the economy.”

Strong Consumer Confidence, Plus a Boost for Incomes

A trio of economic indicators pertaining to U.S. households looked solid last week. The Conference Board’s Consumer Confidence Index notched consecutive months above 130 for the first time since July-August 2019, posting a 130.7 February mark. The University of Michigan’s final February Consumer Sentiment Index came in at 101.0, ticking up from a preliminary 100.9.

Friday, the Department of Commerce reported that Americans increased their personal spending by 0.2% in January, while personal incomes improved 0.6%.

Buyers Have Flocked to New Homes

New home sales, according to the Census Bureau, improved 7.9% in January; the annualized pace of new home buying was the best seen since July 2007. Year-over-year, sales were up 18.6%. Housing market analysts cited a favorable economy and favorable weather as factors.

Final Thought

Right now, there is no forecast for how the coronavirus outbreak may affect consumer demand or supply chains. The impact may not be known for months. But remember, your investment strategy should reflect your risk tolerance, time horizon, and goals, and it also should take into consideration periods of market volatility. Fear is driving decisions in the financial markets. Nobody would blame you if this uncertainty gave you a bit of anxiety as well.

Questions I have been getting concerning the Coronavirus:

What stocks should bounce back after this multi day crash in the markets?
When the markets sells rapidly like we saw last week, the old saying goes ‘sell now, ask questions later’. What questions should we be asking ? We should be asking what companies will feel the impact, which ones will not ! Its easy for the market to throw out the baby with the bathwater so to speak. Some stocks like google, make money on ‘search’, the Coronavirus doesn’t impact that, in fact there could be more ‘searches’, because of the virus , more people staying in and looking for info, entertainment etc.. Amazon stock has also been hit hard. There has been no escaping the ‘Coronavirus correction’. Yet, Amazon’s growth is in cloud computing, their AWS division. I can’t see how ‘cloud’, could be adversely impacted.
Is there a Wall St saying that describes what has happened?
Yes perfectly, Markets go up by way of an escalator, and come down by the way of an elevator. Investors have enjoyed the escalator ride up since early Oct with the Dow heading towards 30,000. New all time highs every few days or weeks. Yet when a headline like the Coronavirus hits, the elevator goes down several stories at a time in a very short period of time, wiping out gains prior to the escalator ride up from Oct. What should investors do? Understand, this is not only a cliche, it really happens, all the time. Best way to combat this? On the escalator ride up, incrementally, sell and take profits, and be ready for the that elevator ride and the buying opportunities that creates!
Are there any ‘silver linings’ for the US?
Yes, going forward US companies will not be so reliant on China. Many US companies may bring back more of the production back to the US. From the trade deal, and now the Coronavirus, many CEO’s are looking to pivot back to the US (or Canada, Mexico).
Should I buy airlines, and cruise stocks since they are down so much?
No! There are plenty of other opportunities than try to guess a turnaround. Many investors will be frustrated trying to ‘catch the bottom’, as these stocks continue to make new lows. Prior to the Coronavirus outbreak, technology led, and they should led coming out of this problem.
What are some of the ‘domino's’ that still could fall because of the Coronavirus?
There are obvious industries that are suffering because of the outbreak, such as airlines, cruise companies, gaming companies. Some of the dominoes may be in pharmaceutical space, either from shortages of much needed existing medicines or companies that have rode the Coronavirus "vaccine" wave that fail to produce a viable therapeutic. We are hearing about shortages in China now. This could be very alarming for those who rely on their prescriptions, We are now being more aware of how many pharma companies rely on China for their manufacturing.
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