This month is proving to be a perfect example in showing just how hard investing can be as we have stock markets making record highs at the exact same time as fears about the coronavirus and its potential toll increases.
As of Friday’s close, stocks remain on track for their best performing month since last June. This may be surprising given all the uncertainty surrounding the coronavirus. There may be several reasons for this. First, the base case remains that the impact from the coronavirus will be a 1-to-2 quarter type event with a strong rebound in second half of the year. Second, some expect the coronavirus to be seasonal and as temperatures pick up, cases will decrease. Third, whenever there is a global growth scare, the U.S. typically outperforms given the quality bias, and stable growth seen here. In short, U.S. is the safety trade. Lastly, don’t forget, if you are in a diversified portfolio, your bond allocation should be protecting some of that downside seen in stocks when stock markets sell off.
For the week ahead, it’s more of the same – balancing coronavirus related news with economic data and forecasting what the potential impact may be. As we mentioned in the beginning of this video, investing is hard, but being in a diversified portfolio makes it a little easier.
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