We’ve received a lot of questions from clients about how the coronavirus is affecting the market. Honestly, it’s becoming a global epidemic. For the most part, is contained in China right now with over 3000 cases including 80 deaths. However, those numbers are growing. Out of those cases, 5 of them were in the United States. Schools in China are closed until February 17th and they’ve also closed a major theme park. Travel and leisure are going to be affected the most causing most of the potential issues for the market. People aren’t going to be able to get out and spend money due to the risk of getting sick which could cause earnings to take a hit. There’s a lot of emotion out there and as we’ve talked about before, when the emotion hits, it makes the headlines. The thing to do is remain calm and let us continue to keep our eye on it. We will keep everybody updated as we navigate through what’s going on. What will be big this week is hearing how companies react to their predicted earnings and how this will impact them. We think it may be able to calm the storm a little. As of right now, we think this will be more short-term volatility rather than long term.
About 70% of the market is the consumer. We always watch the consumer very carefully for any direct or indirect changes that could cause markets to move. The largest consumer score that’s used by banks and auto finance dealers is called FICO. There are changes by the largest provider of the FICO score coming up that could make consumer credit harder to get. The reason we’re tracking that is because if the credit is harder to get then spending could be affected. If you apply for a credit card or a home mortgage and those kinds of things, it may not be as easy to get. We will continue to watch this and update you accordingly.
The coronavirus has really taken the top in terms of the news cycle. Right below that might be the talk about impeachment. The election has somehow been lost and has taken the third spot on the news. It feels like weeks ago that’s all people were talking about and now we’re one week away from the first actual vote and it’s nowhere near the top of the news list. The Caucus, which is held in Iowa, will be next Monday. While Senator Sanders, Senator Warren, and Senator Klobuchar would like to be in Iowa campaigning, they’re at the Senate in D.C. instead. That leaves Mayor Pete out of Indiana and Vice President Biden, who are two of the top three candidates right now, able to be out there campaigning. While all the news is focused on Coronavirus, they’re able to have boots on the ground. The national news isn’t really campaigned for any particular person right now but if you are able to have boots on the ground with the people in Iowa, that might be a huge impact for that candidate. The top news really does prove to have an impact, especially in this case. The secondary news is keeping some of the candidates in D.C. Right now, Senator Sanders is leading the latest polls in Iowa so we will see how that turns out after next week. The market has historically negatively reacted to when Bernie Sanders is leading so, we’ll see how that pushes the market positive or negative. As we go through this week maybe we will start focusing back on the election and not so much on the other two topics.
A Week for Earnings
This will be a huge week for earnings. Half of the Dow and a third of the S&P 500 companies are reporting earnings this week. So far, 67% of companies are beating expectations. We really need this earning season to be good to dull out the noise and the headlining news reports. There’ll be a lot of announcements this week and we will be watching for all of it to see what happens.
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.