Enthusiasm for stocks, especially large growth stocks, once again overcame fears of the widening coronavirus crisis. Last Friday’s solid jobs report provided support and earnings continue to generally exceed expectations. Analysts are expecting modest earnings growth overall from a year ago. Fed Chair Powell said the virus is a risk, but that existing policy remains appropriate and suggested the central bank would again utilize quantitative easing in the next slowdown.
S&P 500: 3,380 (+1.6%)
FTSE All-World ex-US (VEU): (+0.8%)
US 10 Year Treasury Yield: 1.59% (-0.00)
Gold: $1,585 (+1.0%)
For some time now, investors have been treating every dip as a buying opportunity. The minor pullback spurred by the coronavirus a few weeks ago has been no exception so far. The reality is that it’s too soon to know how big the economic impact from the virus will be. China changing accounting for new cases has only added to the confusion.
It is true that the global economy is massive, and it takes a lot for it to change course. Meanwhile, this bull market is largely fueled by accommodative central bank policies and low interest rates. Fed Chair Powell supported this thesis this week. The ten-year Treasury is back below 1.6% and low rates are helping support the housing markets and fueling refinance opportunities that are giving consumers more available cash. Also helping this week, Beijing has employed significant stimulus measures to counter the impact of the virus.
Most investors appear most focused on fear of missing out. Hopefully that remains the case over the next few weeks as we learn more about how the virus spreads and how China’s and the global economy are impacted.