Week-In-Review: Stocks Erase Gains For Month & Year
The U.S. stock market erased its gains for the month and year after fear spread that the coronavirus will hurt the global economy. For China, this is almost like a scene from a bad movie because the outbreak happened during the Chinese New Year which is a week-long holiday. During that holiday Chinese markets are closed and the government decided to keep them closed for an extra few days while they deal with the deadly outbreak. For everyone’s safety, I hope this gets resolved soon. Last week, I was flying up and down the East Coast and the thought of everyone having to walk around with masks on (in the future) is not fun. Fingers are crossed, someone, somewhere can find a cure and this deadly virus can go away because losing lives is no joke. Heading into January, the market was VERY extended to the upside and way overdue to pullback. The key now is to analyze this pullback to see if it is another normal “healthy” pullback or something worse. There is a lot of damage brewing on the underneath the surface so if the selling continues, this can easily turn into a more severe “correction.”
Stock fell hard on Monday after the deadly coronavirus spread over the weekend and another case showed up in the United States. Oil prices, and slew of other areas of the market, plunged as fear spread that the coronavirus will hurt the global economy. Stocks rebounded on Tuesday as the market bounced from oversold levels. After Tuesday’s close, Apple reported earnings and the stock was up 2% on Wednesday. Stocks closed mixed on Wednesday as several large airlines stopped flying to China and investors digested the latest round of earnings. After Wednesday’s close, Facebook fell over 6% after the social media giant reported earnings.
Thursday & Friday Action:
Stocks were quiet on Thursday after the World Health Organization (WHO) basically issued a global state of emergency regarding the coronavirus. The big selling showed up on Friday which was the last trading day of the month. Stocks fell over 600 points as fear spread that the ramifications from the virus could adversely affect the global economy.
Market Outlook: Easy Money Is Back
Once again, global central banks are back on the easy money bandwagon after the Fed and the ECB both announced more easy money measures directly aimed at stimulating global markets. The market has soared all year based on two key points: optimism that a trade deal will be reached between the U.S. and China and more easy money from global central banks. In 2019, the Federal Reserve reversed its stance and moved back into the easy money camp. Then, other central banks followed suit and that means easy money is back to being front and center for the market. Phase 1 of the trade deal was signed, now lets see what happens with Phase 2. As always, keep your losses small and never argue with the tape.