Hi Towerpoint,


What happened? A little more than a week ago, on February 19, the S&P 500 closed at a record high of 3,386.16. Yesterday, it closed at 3,128.21, suffering a brutal -7.6% decline in only four days, and turning negative for all of 2020. Since last Wednesday's high, $2.138 trillion of stock market value has been erased. And we all know the reason why - fears about the current COVID-19 (novel coronavirus) outbreak.




Clearly the spreading virus has sent shockwaves through the global financial markets, as declines of this magnitude are by no means ordinary, especially after the stock market just hit an all-time high. Understandably, all anyone can seem to think about right now are the potential negatives of the coronavirus emerging in the U.S. and in other major economies; however, we are confident that eventually the bad news will give way, positives will emerge, and today's worst placed fears will not come to fruition. Considerations:

  1. There will ultimately be a vaccine, as there is already a drug that will combat COVID-19 moving toward first phase clinical trials. And as a testament to advances in drug technology, it took only three months in 2020 for this to happen, versus 20 months for SARS back in 2002-2003
  2. According to Worldometer, there have been 30,597 coronavirus cases with an outcome (2,699 deaths and 27,898 recoveries). The total active cases now stand at 49,923, a drop of 15% from the peak on February 17.

While one death is too many, let's put these numbers into perspective: According to the World Health Organization, just in the US alone for the '19-'20 Flu season, there have been 15,000,000 flu illnesses, 140,000 hospitalizations, and 8,200 deaths. Imagine if everyone with an internet connection followed the spread of the annual flu, case-by-case, hour-by-hour...


We are by no means cockeyed optimists here at Towerpoint Wealth, and we fully understand that equity markets react unpredictably to the unknown. However, we also recognize that historically, Wall Street's reaction to epidemics and fast-moving diseases is often short-lived, and we feel that today's current coronavirus fears will be no different. At Towerpoint Wealth, we believe it is not "if" but "when" the markets recover; and that is likely to be when investors believe the impulse of new coronavirus cases has peaked.




Additionally, we firmly believe the US consumer is on solid footing and will continue to be one of the key drivers of US economic growth in 2020. Some have suggested that the 1918 Spanish Flu, which killed hundreds of thousands in the US, could happen again. And despite the severity of the 1918 event, the relatively small amount of research done on the economic effects of that pandemic indicate that they were short term. We all recognize that the US rebounded from the Spanish Flu when all was said and done, and 2020 is certainly not 1918. Technology and medicine are light years ahead of where they were a century ago, and news today is now instantaneous. We suspect that any drop in corporate earnings and economic activity will be short-lived, and more than made up for over the remainder of the year to come.


Put differently, it is not time to hit the panic button. Stay invested, systematically rebalance your portfolio, remain disciplined and faithful to your plan and investment philosophy.


If after reading this you continue to have concerns, and/or do not currently have a thoughtful financial and investment plan or strategy in place, please message us (info@towerpointwealth.com) to talk further. The world continues to be an extremely complicated place. We are here for you, and look forward to connecting with, helping, and being a direct, fully independent, and objective expert financial resource for you.


- Nathan, Raquel, James, Joseph, Lori, Steve, and Jonathan


 
 
 
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