Markets Impacted by Coronavirus…
All equity market indexes pulled back last week as the uncertainty on the Coronavirus impact is front and center on investor minds. We certainly know the transportation sector will take at least a temporary hit. Starbucks, KFC, Pizza Hut, McDonalds, various hotel chains, and airlines will be immediately impacted. Also on my mind is this question: Will manufacturing exports from China also take a hit, which can lead to a shortage of supplies globally?! This can certainly impact GDP for 2020.
It is very tragic that China has reported 80 deaths and 2800 confirmed cases. The numbers are certainly going to grow for the time being. In the US, we have 5 reported cases thus far. My prayers go out to all people impacted by this unfortunate situation….
As of this writing, the stock market is down significantly. Keep in mind the markets have not had a pull-back in some time, so for now, this may just be an excuse for investors to take profits. As long as the virus is able to be contained, the pullback shouldn’t be long lasting.
Last week the Dow Jones Industrial Average fell (1.20%), the S&P 500 followed suit falling (1.01%). The Nasdaq Composite lost (.79%) and the Small cap Russell 2000 (2.19%).
Internationally, the developed market EAFE was down (.61%) and the Emerging Market stock index lost (2.34%).
Bonds as expected rallied on the Corona fear sending the 10 Year US Treasury Yield down to 1.69% from 1.82% the prior week.
Corporate Earnings Continue
As always, no matter what is going on in the world, Corporate America keeps on moving as we are in the middle of 4th Quarter Earnings Reports. So far, 85 S&P 500 companies have reported, with 68% of those companies beating expectations. This week, 141 companies will report.
The consensus is that earnings for all of 2019 will have increased a mere 1% from 2018 when the dust clears. For 2020 the consensus is calling for a 10% corporate earnings increase. Much of 2020’s increase is based on the signing of the Phase 1 US/China trade deal. The signing of the trade deal has many believing the US Corporate Expenditures will increase into new projects with the belief that as of now, no more additional tariffs are on the horizon.
What will happen? As always, time will tell!
Housing Industry Showing Improvement
Rates on 30 year fixed-rate mortgages have fallen to approximately 3.6% from 4.5% a year ago. Reports for housing starts, existing home sales, and home prices have all been improving. Housing has been one area that has lagged most of the current economic recovery. Keep in mind when people purchase homes, that furniture sales washing machine sales, and other durable goods increase, which can cause a trickle-down impact on several industries. Hopefully if this continues, it will help our manufacturing sector improve during 2020 which can have a positive impact on US GDP.
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