#448 Fear Trades

Virus Volatility

There’s a lot of emotion and facts flying around right now that may not be fully organized to counter the current fear trades that are happening. That causes volatility in the market. The market has been down 12% over the past seven trading days. It was the highest weekly volume we’ve seen in a decade in the market. There were fewer than 20 stocks in the S&P that are still above their 50-day average price. The Dow Jones went from a 52-week high to a 52-week low all in the past 10 trading days. From a historical standpoint, last week, the selling pressure was very similar to what we saw on 9/11 with the terrorist attacks. When the market first opened back up, there was intense panic and selling just like we saw last week. At that time, the Fed came in and the economy restarted. The S&P was up 20% after all the fear-selling. From a historical standpoint, these types of violent trading events are usually short-lived. There are obviously no guarantees, but this could be another short-lived situation. To keep things into perspective, even though this is a very sad event, 3000 people have died from the coronavirus as we sit here today. On the other hand, 80,000 have died from the flu. The flu, however, has never shut down economies. Another thing to think about is that you can travel anywhere in the world at any time and contract the flu. What we saw last week was more fear trading rather than fundamental trading. Corporate America is healthy and the American consumer is healthy which are both great market indicators and things to keep in mind. The intra-year pullback that we’ve seen on average is 11%. What we’ve had is an extended bull market. Sometimes you must have a pullback like this to get new buyers in the market in order to hit a higher high. In an election year, we usually see volatility there as well. Everybody needs to know that we do hear and see the emotional impact but we’re pulling back the curtain and looking at the actual facts.

U.S. Consumer

The market has a heartbeat and the little blip that we saw last week is what we refer to as volatility. A huge market indicator is the U.S. consumer. Our current anxiety lays around the worldwide issue of the coronavirus but let’s bring it back to the United States for a moment. In the last month, which is not a big sample size, personal income went up 0.6%. That’s the largest percentage in a month’s span in over a year. New single-family home sales have had the fastest growth pace in a month’s span since 2007 at 18.6%. While we’re seeing this worldwide issue, if we bring it back home, in January when this virus started, we’re still seeing a lot of productivity out of the U.S. consumer which is our front line of defense. There’s disruption going on, but a positive that may come from this is that more places locate their business in the United States just to see to it that we don’t experience something like this again. It’s not only about savings but consumer spending as well and looking at the data, we’re seeing both savings and spending. Those are two good things happening at once. We’re on a positive trend from a U.S. standpoint.

Positive GDP

GDP is moving along at about 2.5% and to be honest, 2.5% to 2.75% is still a very solid number. If you really boil a lot of this economic data down as we have, what you find is what’s really missing right now is the business investment that we would have gotten with the Chinese – American trade deals. They’re now relaxing a little bit but it’s not off for the year, it’s still early. We may see a little bit of tick down on GDP and on the business investment. It doesn’t mean it’s going to stay there for the rest of the year. We’ll get past this and it’ll rebound. There’s a lot of momentum there and once we get to a stable point on the coronavirus, we could see momentum start to kick back up.

Primary Elections

We still have a primary election going on in the middle of all the headlines that seem to be getting lost. The front-page news is focused on the virus, but 14 States get to vote tomorrow, including our home state, Alabama. The two important states we’re watching are Minnesota and Massachusetts. The reason for that is, Senator Klobuchar from Minnesota and Elizabeth Warren from Massachusetts, are still in the race. We’ve dropped down to 5 or 6 candidates now running and how those senators do in their home state will decide if they continue. If they do continue, it is going to put a lot more pressure on the likelihood of a brokered convention. The odds of 65% say that no candidate will get the majority, which means that this is going to last all the way through to July. That puts a lot of unease in the market in terms of uncertainty on who will be facing President Trump in the November election. Something we’re watching very closely is the results of Super Tuesday, March 3rd.


Greg Powell, CIMA®
President and CEO
Wealth Consultant
Email Greg Powell here

Bobby Norman, CFP®, AIF®
Managing Director
Wealth Consultant
Email Bobby Norman here

Ashley Page, JD, MBA
Senior Vice President
Wealth Consultant
Email Ashley Page here

Trey Booth, CFA®, AIF®
Senior Vice President
Wealth Consultant
Email Trey Booth here

Adam Vansant, AIF®
Associate Vice President
Wealth Consultant
Email Adam Vansant here


Fi Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. Fi Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

Economic forecasts set forth in this presentation may not develop as predicted.

No strategy can ensure success or protect against a loss.
Stock investing involves risk including potential loss of principal.

Securities and advisory services offered through LPL Financial, Member FINRA/SIPC and a registered investment advisor.

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