Market Volatility in Perspective

Financial markets have been roiled recently amid fears over the impact of the fast-spreading coronavirus. These near-term disruptions to economic activity are the result of efforts to contain it. We see a downshift in 2020 global growth, with uncertainty around the size and pace of slowdown. While there are always unplanned risks, we do expect a rebound in activity once the disruptions dissipate and don’t see it derailing the U.S. expansion at this time.

What are key takeaways for investors? First, we encourage investors to keep things in historical perspective. Second, know the importance of staying invested and avoid reacting in ways that could derail long-term financial goals. 
 

Keep things in perspective

To provide historical context, the table below illustrates how the stock market responded during other past growth scares and bear markets. It also shows the period of positive market performance in the 12 months that followed these crises.

Stay invested

The chart below shows how a hypothetical $100,000 investment in stocks would have been affected by missing the market’s top-performing days over the 20-year period from January 1, 2000 to December 31, 2019. An individual who remained invested for the entire period would have accumulated $324,019, while an investor who missed ten of the top-performing days during that period would have accumulated $161,706.

PFG Private Wealth Management, LLC is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. This material and information are not intended to provide tax or legal advice.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance. 

This material represents an assessment of the market environment as of the date indicated; is subject to change; and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the funds or any issuer or security in particular.
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Prepared by BlackRock Investments, LLC, member FINRA. This material is provided for educational purposes only. BlackRock is not affiliated with any third party distributing this material.

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What’s the Real Return on 12 Month CDs?

PFG Private Wealth Management, LLC is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. This material and information are not intended to provide tax or legal advice.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.  Insurance products and services are offered and sold through Perry Financial Group and individually licensed and appointed insurance agents.

S&P 500 Performance During Epidemics

After weeks of headlines about the coronavirus outbreak, markets have been caught in a volatile pattern of surges and retreats. Here’s what you should know:

Why are markets so volatile?

Disease outbreaks are hard to predict and come with a great deal of uncertainty that can make investors nervous—particularly after a period of record market gains.

As the epidemic spreads beyond China, investors worry that it could cause serious disruptions to trade and the interconnected global economy.

How long will the volatility last?

It’s hard to say. Though the human cost of an outbreak like Coronavirus is tragic, it’s unclear how

widespread the economic fallout will actually be. We can’t predict what markets will do, but this isn’t the first time we’ve grappled with market reactions to an epidemic.

Here are some examples from previous outbreaks:

Chart source: CNBC, Yahoo Finance

Though the past can’t predict the future, we can see that historically, markets reacted to epidemics with panic selling but recovered after the initial outbreak. However, epidemics don’t happen in isolation; the underlying economic and market fundamentals will influence how investors react long-term.

Pullbacks and periods of volatility happen regularly, for many reasons.

Whether the cause is an epidemic, geopolitical crisis, natural disaster, or financial issue, markets often react negatively to bad news and then recover. Sometimes, the push-and-pull can go on for weeks and months, which can be stressful, even when it’s a normal part of the market cycle.

The best thing you can do is stick to your strategies and avoid emotional decision-making. Why? Because emotional reactions don’t lead to smart investing decisions. The biggest mistake investors can make right now is to overreact instead of sticking to their strategies.

We’re keeping an eye on how the epidemic may affect our clients and will be in contact if adjustments to your strategies need to be made.

Have questions about your personal situation? Don’t hesitate to call our office at (813) 286-7776.

PFG PRIVATE WEALTH MANAGEMENT, LLC
www.pfgprivatewealth.com

Chart Source:

S&P 500 performance during outbreak:
https://www.cnbc.com/2020/02/24/avoid-this-investing-mistake-as-coronavirus-fearsgrip-the-markets.html
S&P 500 performance six months after outbreak: Yahoo Finance. 6-month performance between open of first trading day of the month after end of outbreak to adjusted close of final trading day of the sixth month.
SARS: April 1, 2003 – Sept 30, 2003
MERS: Dec 3, 2012 – May 31, 2013
Ebola: March 3, 2014 – Aug 29, 2014
Zika: March 1, 2016 – Aug 31, 2016

PFG Private Wealth Management, LLC is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. This material and information are not intended to provide tax or legal advice.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance. 

The Impact of Coronavirus for Investors

What we’re doing with our portfolios:

Public health outbreaks and epidemics like the recent coronavirus can quickly scare investors and, eventually, affect economies and businesses. The recent coronavirus outbreak has shut down airports, halted trade, and led to the rapid construction of new hospitals in China. The effects of the outbreak may push China’s economy into a period of slower growth, with stocks trading lower as investors seek protection.

So, what does that mean for the portfolios we run?

Key Takeaways

  • Looking at nine major outbreaks since 1998, there is little evidence linking global epidemics with long-term investment fundamentals.
  • The Chinese economy may slow, perhaps even meaningfully, but that is not a reason to invest or divest. Long-term investing is often best disconnected from short-term economic reactions, so we implore investors to maintain their focus on what matters.
  • Across the portfolios we run, we do have a relatively small exposure to Chinese assets (both directly and indirectly) but remain confident these holdings will deliver positive outcomes for long-term investors.

Rest assured our portfolio managers are closely monitoring your investments.  Please reach out to your advisor with any questions.

PFG Private Wealth Management, LLC

Should Investors Worry About Impeachment?

Tweets and speeches don’t drive the stock markets – numbers do

It’s now clear that the investigations into President Trump are likely to continue through the 2020 elections. What’s still uncertain is the impact that these investigations will have on the stock market.
After rallying since Trump’s election victory in November 2016, the S&P 500 Index has done pretty well, but it has stumbled at times too:

• Ending 2016 up 9.54%;
• Zooming up 19.42% in 2017;
• Dropping 6.24% in 2018; and
• Up more than 18% so far year-to-date at the end of the third-quarter in 2019.

Although stocks have rewarded investors with healthy returns, investors seem more nervous that Trump will be impeached because not only will his pro-business agenda be stalled, but the chaos could send the markets into a tailspin. At least that’s the worry.
And although no one has a crystal ball to tell us how the Trump investigations will end, investors would be smart to tune them out. Here are a few reasons why.

Economics Matter More than Tweets

Economics and numbers matter way more than politics to the stock market. Trump’s tweets and speeches get all the media attention, and while the market might seem to react a little bit at times, the reality is that boring economic numbers drive the markets one way or the other. And consider these numbers:

• Unemployment is at 3.7%, one-tenth of a percent from the lowest level in over 50 years.
• We have seen 107 consecutive months of job growth, the longest streak ever.
• Wages have risen 3.2% this year, the strongest year in over a decade.
• Inflation has run below the Fed’s intended longer-term 2% target for most of this 10-year expansion and core inflation has averaged 2.1% so far this year.
• Consumer spending came in much higher than expected with a 4.7% annualized growth number, the highest gain in 4 years.

Impeachment is Unlikely Anyway

Investors should remember that impeachment is very unlikely as no U.S. president has ever been impeached and kicked out of office.
Andrew Johnson and Bill Clinton were both impeached, but they were acquitted in the Senate, where a two-thirds majority is required for conviction. Richard Nixon avoided impeachment and conviction only by resigning office.

Earnings Drive Stock Prices

What should investors worry about? Numbers. Specifically, corporate earnings.

It’s an investing adage that earnings are the lifeblood of the stock market. Stocks move in response to real or perceived earnings changes. If you are thinking of owning individual stocks, the trick is to find those whose earnings growth is strong, and should remain strong.
In aggregate, however, investors should worry about the upcoming earnings season as we head into the fourth quarter of 2019. Because according to research firm FactSet, as of September 27, 2019, 113 of the S&P 500 companies have issued EPS (earnings-per-share) guidance for the quarter.

And of these 113 companies, 82 have issued negative EPS guidance and 31 companies have issued positive EPS guidance. For perspective, the number of companies issuing negative EPS is above the 5-year average of 74.

Ignore Tweets and Speeches

Again, Trump’s tweets and speeches will continue to get all the media attention. But if you intend to own publicly-traded companies, make sure you read annual reports and earnings releases, not tweets.

PFG Private Wealth Management, LLC is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. This material and information are not intended to provide tax or legal advice.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.