The Bull market rolls on. At least that is what we have been hearing from our economists, strategists, and portfolio managers (PMs) on how they are feeling for the coming year.
There has been much discussion in our client meetings recently about how their portfolios and the overall markets might be impacted by things like the US Election this fall (will Trump be re-elected?), or the newsworthy impact of the Coronavirus on world markets.
The short story from the industry professionals we hear speak regularly is that 2020 should end the year with positive returns, with some increased volatility throughout the year. It’s not likely to be as good as 2019, but decent returns overall.
When market disrupters like the Coronavirus come out, investors tend to overreact, without knowing what might actually happen. Our managers are positioning their portfolios with these things in mind; and they try to capture opportunities when investors give in to the fear and sell shares, which forces the equity’s price down. The PMs wait for a drop, and buy the stock at a discount. As long as a company’s long-term outlook hasn’t changed, they still want to own the company; so they may just tweak their short-term buy/sell strategy.
Overall, the Coronavirus so far is being viewed as a one-off event. Although it has infected more people than the SARS outbreak in 2003, its mortality rate is actually less. The seasonal flu kills over 650,000 people worldwide annually, according to the CDC, and there is far less preventative response for flu epidemics. There are some economic impacts in China, but remember that these are temporary and once it is over, the pent up demand from consumers in China will have a positive impact around the world.
The Trump question is being viewed a non-issue for markets as well. When he was first elected in 2016, the markets went up. On the other hand, if the Democrats pull off a win this fall, we could see some market pull back simply because the Democrats are less business-friendly, which can scare the markets into a short-term sell off. But again; it will be temporary.
We wanted to share this chart of the markets over the past 20 years. Keep in mind that something is always in the news that impacts markets for better or worse. The key to surviving these bumps in the road is staying invested, having a plan, and choosing top quality money managers who take emotion out of the equation, and invest with conviction and discipline for long-term results.