Capital Market Perspective You Need Now

The surge in cases of the COVID-19 resulted in a sweeping reaction last week in the capital markets. Three market indicies that are familiar to many individual investors—The Dow Jones Industrial Average (The Dow), S&P 500, and Nasdaq—fell 10 % or more, the largest weekly loss since the 2008 financial crisis. Fears of a pandemic and/or prolonged global economic slowdown, heralded by the coronavirus worries, triggered the widespread sell-off.

Our Entrust perspective is that while the current downturns signal an unexpected slowdown in the first and second quarters of 2020, we may not approach recession territory due to the strong fundamentals of the U.S. economy. If the U.S. is able to avoid a recession, the world will likely avoid recession as well.

You may find these key points reassuring:

• Federal Reserve Chairman Jerome Powell indicated that the central bank will take action if the economy takes a hit from the coronavirus.
• Selling into a steep downturn is rarely a good strategy for investors. As Warren Buffet says, “Be fearful when people are greedy, and greedy when people are fearful.” In other words, this is the time to be greedy. A 10% market downturn may signal a unique buying opportunity for investors.
• The strong rally in bonds in the face of the sell-off in the equity markets is a reminder of the importance of an appropriately diversified mix of stocks, bonds, and cash. Unpredictable situations like this illustrate why our Entrust investment committee builds and implements broadly diversified asset allocation portfolios for our investors.

Recognizing that review and analysis of market and economic conditions is dynamic and definitive only in hindsight, our research suggests that the impact of the coronavirus will likely be short-lived and relatively shallow.

As always, please do not hesitate to contact us regarding cash you would like to invest and put to work for you, or with any questions you may have.