The outbreak of the Corona Virus creates unintended consequences.
First, we have to mention that we are virtually in all cash due to selling equities across all client portfolios before this market dive.
Where are we (the market) now? The S&P 500 has been halted as I write this commentary. What does this mean? The S&P 500 has "circuit breakers" built in to stop trading when the index falls more than 7% in one day. At 6:40 A.M. on Monday, March 9th, the market is not trading due to this massive one-day dive. The stock market has fallen almost 20% in 15 days, which is the largest and quickest correction since 1929 (an ominous year for stocks). Trading has resumed, but the market continues to decline.
Where are we (client portfolios) in relation to the stock market? This is the crucial question, as what the market is doing is significant, but how accounts are performing in this environment is of paramount importance. As mentioned in previous emails, we went to a virtually "all cash" position at the end of January. So, we have to take a victory lap at this point and stress to clients that we have to avoid this massive market downdraft. Again, we have to emphasize that we have no stocks in client portfolios, so we have not experienced declines due to the recent market selloff.
What are the indicators telling us about the outlook from here?