Stocks Tumble Further Amid Travel Bans, Event Cancellations

We care about your well-being, financial and otherwise, and understand you may be feeling some apprehension as you process the onslaught of this week’s headline news. Admittedly, it’s a lot to take in. We have the benefit of working with analysts who have their finger on the pulse of these rapid-fire announcements and wanted to share some of their insights with you during this time of uncertainty. We hope you find it helpful.

Thursday morning started with the news that U.S. stock markets (as represented by the broad market S&P 500 index) tumbled more than 7%, once again triggering the circuit breaker that halts trading on the New York Stock Exchange for 15 minutes. Both the Dow Jones Industrial Average and S&P are technically in bear market territory, a quick reversal from the S&P’s February 19 record high, notes Raymond James Chief Investment Officer Larry Adam. Fears about the spread of COVID-19 – a so-called black swan event – have suspended sports events, travel and on-campus activity at universities across the country. These black swan events are inherently unexpected, and typically prompt investors to quickly recalibrate their market expectations without the benefit of historical precedence, Adam added.

In addition, European stocks sank, as investors had hoped for a rate cut from the European Central Bank but got further stimulus measures instead, and the U.S.-Europe travel ban deepened the slide for oil prices, as well as transportation stocks. The ban applies to 26 European countries, but not to Americans seeking to return stateside. However, those citizens could be subject to extensive screening measures upon landing and possible self-quarantine.

Healthcare Analyst Chris Meekins and Washington Policy Analyst Ed Mills believe we should gain greater clarity within the next week on the likely duration and extent of the outbreak in the U.S., as well as insight into any local and federal efforts to contain the spread of the virus. The central bankers of the Federal Reserve meet again next week and expectations are that they’ll cut overnight rates another 50 basis points, Adam said.

Unfortunately, Meekins expects headlines to get worse before they get better, so we wanted to prepare you for that possibility. He and other analysts are looking to see if policymakers will take quick and decisive action on fiscal stimulus and whether those actions will be enough to calm fears. They believe this will be a multistep process with targeted relief for individuals before a systemic fiscal stimulus package comes together, potentially prolonging the timeline and related volatility.

There remain a number of unknowns, including how many individuals will be affected in the states, so it’s difficult to model economic outcomes with any degree of confidence, explains Mike Gibbs, director of Equity Portfolio & Technical Strategy. Investor sentiment is likely to take a hit for the foreseeable future. Gibbs, too, is looking toward the federal government for stimulus options and clarity on the rate of infection across the country as more testing becomes available. Depending on those results, equities could already be near or at a bottom and subsequently rally. If the infection rate is higher than investors anticipated, Gibbs expects additional downside.

We know this level of turbulence can be unnerving for even the most resolute investors. Please reach out if we can answer any questions for you. In the meantime, we encourage you and your family to follow practical hygiene protocols outlined by the Centers for Disease Control and Prevention to help mitigate the extent of the spread. We’ll continue to monitor the latest market and economic news and share the most relevant updates with you. As always, you can monitor your portfolio 24/7 through Client Access.