Full-Blown Panic: Buy, Hold or Sell?

Just weeks after making new all-time highs, the US stock market, along with markets worldwide, has plummeted in dizzying fashion, rocked by coronavirus news and uncertainties over duration, intensity and ultimate impact on the global economy. The sudden oil price collapse has spurred even greater confusion, contributing to Monday’s 7% decline of 2000 points — a correction of 20% off its all-time high on February 14.Key questions for us: will this disruption be short-lived? What is the impact on the economy and corporate profits? What are our policy options?

The answer to the first two questions is we don’t exactly know, though given past viral outbreaks, one can postulate that the virus will peak in the not-so-distant future. Indeed, early signs indicate we may have already seen a peak in virus activity in China, Japan and South Korea, with business activities beginning to resume. Companies are alerting us to potential hits to sales and earnings, but even they don’t know the extent as events unfold in real-time.

What we do know is that the market has rapidly and brutally discounted dire prospects in radical fashion. Many stocks whose fundamental long-term business models remain intact have become much more attractively priced than they were just a few weeks ago. Typically, investors, look past one-time hits to long-term earnings potential and may eventually do that here, too. We also know that the Fed is not waiting to see the full economic fallout to act, cutting rates dramatically last week by half a percentage point with expectations for more. The White House has also promised fiscal stimulus measures to be enacted post-haste.

In the US, it seems we have not yet peaked in rate of new coronavirus infections, but it is not impossible that we will in April. We are already seeing one silver lining in the housing and construction market: low interest rates are driving seven-year highs in mortgage refinancing, and the lowest 30-year mortgage rates ever, putting more money in consumers’ pockets.

We came into this difficult period with full employment and healthy household finances, putting us in a strong position to weather what is most likely a short-term disruption to consumer and business activity. We don’t know, however, how long this all lasts and how deep the damage will be, so volatility in the stock market will almost certainly continue with more downside not unlikely, until the smoke starts to clear. It looks like we may be setting up nicely,
however, for a strong second half.

For now, we are holding our stock positions, and selectively and opportunistically adding as warranted. As always, please feel free to contact us with any concerns, questions, or other.

Best,
Barbara Doran
Managing Member
bdoran@bd8cap.com
BD8 Capital Partners LLC
299 Park Avenue, Floor 21|New York|10171
Cell: 917-733-7644
Office: 646-885-5682
Fax: 917-580-6882

The content of this article is for informational purposes only and should not be considered a recommendation of any particular security, strategy, investment product or investing advice of any kind. There are risks associated with investing, including the entire loss of principal invested. Past performance does not guarantee future results. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the opinions of Spire Wealth Management, LLC, Spire Securities, LLC or its affiliates.

Spire Wealth Management, LLC is a Federally Registered Investment Advisory Firm. Securities offered through an affiliated company, Spire Securities, LLC a Registered Broker/Dealer and member FINRA/SIPC

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