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7am Saturday

March 7, 2020

Happy Saturday! Yes, we can be glad it’s Saturday after another volatile week in the market. This week’s newsletter includes more charts than usual as I really wanted to help you visualize some of the most noteworthy items that you need to know to be an informed investor.

Market & Economic Update

+ U.S. stocks had another wild week. The S&P 500 had large swings every day this week, with the index being up or down by more than 2.5% every day except Friday. How often do we see daily price moves this big on a daily occurrence? Rarely. But, remember, it won’t last forever.

Here’s how the week went for the S&P 500…

  • Monday: +4.60%
  • Tuesday: -2.81%
  • Wednesday: +4.22%
  • Thursday: -3.39%
  • Friday: -1.71%

While it didn’t feel like it, the S&P 500 actually finished in the green this week (+0.61%)!

The Dow Jones Industrial Average was up 1.79% and the NASDAQ Composite was up 0.10% for the week.

+ The current correction is well within normal trading ranges. While the fear and hysteria is unlike anything we’ve seen since 2008, it’s important to remember that so far the S&P 500’s pullback from its high is at normal drawdown levels. In fact, the decline we’ve seen from all-time highs is right at the median drawdown that we typically see each year. Of course things could easily get worse in the near term, but if what we’re pricing in so far is the worst-case scenario, it hasn’t been all that bad:

Source: Bespoke Investment Group

We are currently in the 7th correction of 10%+ since 2009. On average, corrections during this bull market have lasted 78 days and seen a decline of 14.92%. So far this one has only lasted 16 days, but the drop of 13.43% is close to the average:

Source: Bespoke Investment Group

+ Interesting fact: The China ETF (ticker: ASHR) is actually up 2.01% since the S&P 500 peak on 2/19/20.

+ U.S. Treasury yields have plunged to record lows:

+ The yield on the 10-year Treasury fell below 1% for the first time in history just as the Federal Reserve lowered interest rates this week with an emergency rate cut of 0.50% on Tuesday. With Treasury yields falling, the Fed was forced to lower the Federal Funds rate by 50 basis points on Tuesday. The rate cut was unexpected as the Fed meets March 18-19 and investors were expecting a cut then. Since Tuesday’s rate cut futures markets have been pricing in an additional 0.50% cut at the March 18-19 meeting. The problem with Fed rate cuts is that they don’t create a vaccine or stop the spread of the coronavirus. It only mitigates the economic impact that comes from people cancelling travel plans and staying at home.

+ Mortgage rates are the lowest we’ve ever seen. As of Thursday night the average rate for a 30-year mortgage was 3.29% making homes very affordable:

+ Oil prices are also declining with WTI crude falling below $42 a barrel:

+ Global air traffic is poised to fall 8.9% this year as the coronavirus outbreak causes a sudden plunge in demand around the world. That would be the biggest drop since data is available going back to 1978. Even the 9/11 terrosit attacks and the Great Recession in 2008-2009 didn’t see drops this big:

+ The U.S. job market continues to surge, despite ongoing concerns about the spread of the coronavirus.

  • Employers added 273,000 workers in February (more than expected).
  • The unemployment rate also fell back to a 50-year low

+ Election betting odds have seen huge changes this week. With Super Tuesday in the books and several Democratic nominees dropping out this week, Biden is looking like the clear front-runner to challenge Trump in this year’s election:

Source: electionbettingodds.com

Social Media is Feeding the Fear

Morgan Housel says it well: “This is the first global crisis in the social media age. What we’ve learned from social media in the last decade is that 1) information spreads fast, 2) false information spreads fastest because it’s more sensational, and 3) tribal identities are heightened when debates take place online vs. in person, so healthy debate quickly descends to a my-team-versus-yours battle. FDR said, “The only thing we have to fear is fear itself,” in an era when the only information source was a morning newspaper, edited and fact-checked by professionals, written by journalists who weren’t motivated by likes, retweets, or paid per click.”

So what should investors do next?

Read my latest blog post to get my thoughts: The Coronavirus…What Should Investors Do Next?

If you find it helpful, please share it. My hope is to help as many people as possible make smart decisions about their money.

Your Weekend Resources

🎧 I’m Listening To: So How Do You Pay For College? (The Invested Dads Podcast). If you’re thinking about investing while the market is down check out this episode where Josh and Austin discuss different ways to save and invest for college.

👩 In Honor of International Women’s Day (tomorrow): Women Who Changed Finance Forever (The Everyday Advisor). Jess profiles five women who have made a big impact in finance.

🤝 In Agreement: “Currently, only 23% of Certified Financial Planners™ are women. I want to see that number grow! Both men and women are equipped and capable of building clients’ financial legacy. Clients are best served with a diverse team. Read more about what advisors do from the CFP Board. Maybe you or someone you know might find their calling!”

📧 My New Favorite Daily Email: The Daily Dad. All dads should sign up for this daily email from Ryan Holiday. I discovered this daily email on fatherhood, love, and raising great kids about two weeks ago. It’s so good I think moms would like it too!

☀️ Great Health Tips: Stress is Optional – How to Stay Stress-free in an Increasingly Stressful World (by Isaac Lien). Fantastic article packed with tips to help you reduce the stress of everyday life.

That’s it for this Saturday. Thanks for reading!

Have a great weekend,


↩️ PS – If anytime you get an email from me and you want to share a comment or ask a question, simply hit ‘reply.’ I read every email, and try my best to respond.

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