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February 2020 Market Commentary Thumbnail

February 2020 Market Commentary

Recent Commentary

During times of heightened market volatility, our behavioral biases tend to vacillate between fear and greed, and we can feel tempted to deviate from a predetermined investment strategy. We remind investors that periods of elevated volatility results in higher market fluctuations. Amid this backdrop of elevated volatility, we will continue to monitor financial market conditions and track the data surrounding COVID-19. We continue to believe that investors should be patient and adhere to a well-constructed, diversified investment portfolio anchored to your goals and time horizon.

Below is an overview of some of the data points that we have been monitoring:

  • Data through February 29th suggests the COVID-19 outbreak is improving, however South Korea, Italy and Iran bear monitoring for growth or decline in case counts.
  • Economic data from December and January provided evidence the U.S. economy was slowing before COVID-19 burst onto the scene. Household consumption growth, representing approximately 70 percent of U.S. GDP, remained stuck in a sideways channel since 2016 but slowed in January.
  • The February sell off thrusted volatility to one of its highest points since it has been tracked (CBOE VIX reached 40.1). The CBOE VIX Index is used to track market volatility and was introduced in 1990.

Fixed Income

  • Flight to quality more than offset widening credit spreads amid a backdrop of elevated volatility.
  • Safe haven flows detracted from lower quality and international.
  • Interest rates continue to fall globally.

Equities

  • Elevated uncertainty associated with the Coronavirus outbreak weighed on business activity and investor sentiment.
  • 71 percent of S&P 500 Index companies reported a positive earnings surprise on lowered consensus estimates, but average index earnings grew just 0.7 percent.

Alternatives

  • Slowdown in business activity weighed on energy and industrial commodity sector sensitive asset classes.
  • Despite falling yields, risk off sentiment detracted from U.S. REIT returns.

Please reach out to your Legacy One Financial Advisor to discuss headlines, any concerns you may have and to review your individual portfolio.