Sunday, March 1, 2020

The Week Ahead

(Note: March will be a vacation month. Posts will be less frequent. I have scheduled some interesting posts on finance and economics, but sometimes the Google engine that powers this stuff in unreliable, if you can believe that. Go Google!!)

Investors have a lot to digest after panic over the economic impact of the coronavirus outbreak sent the market tumbling to its worst weekly loss since 2008 and the 10-year Treasury yield to a record low. While the week ahead could include some coordinated actions by central banks to soothe anxiety, there are also likely to be more earnings warnings from multinationals across sectors.

On the economic calendar, PMI (Purchasing Managers' Index) reports from across the world will be watched closely, as well as reports on durable goods orders and the February employment report. Amid all the market turmoil, energy sector eyes will be focused on Vienna as ministers gather to assess the economic situation and make a decision on output.

Oil Markets
After oil futures with the largest weekly decline in more than 11 years, the OPEC+ meeting in Vienna on March 5-6 takes on added significance. The meeting could include an announcement on extending productions cuts or even maker a steeper cut than the current 600K barrels per day. The impact of the coronavirus outbreak on oil demand going forward will also be a theme of the meeting. "OPEC+ action appears likely, but the reality may be more muted. As usual, actual supply cuts will likely depend heavily on Saudi Arabia, where cuts already far exceed official quotas," says Schneider Electric commodity analyst Robbie Fraser.

Don't Panic Sell
The classic definition of a correction is a 10% drop. So even at the lowest that the indexes are getting to Monday, I still believe the correction will remain more time-based than a classic correction.

You should be thinking about what to buy, not blindly selling on these headlines.

The media likes ginning up fear; it sells more advertising. Instead consider what the actual mortality rate is based on the data.

See: How does the new coronavirus compare with the flu?

In a sharp sell-off, there might be some really good stocks that will resist the pull of this downdraft. If you are a trader focus on growth names that are standing up to it. Otherwise, unless you have a fundamental reason to sell, don't unless your long-term chart (weekly) is 2 percent below the 200-day moving average in a downward trend. 

In full disclosure, I did sell an inverse ETF position last week for a 15% gain. My portfolio is 20 percent cash and money market, 30 percent bonds, 30 percent energy (recent long-term positions with 4 to 5 percent dividends), 5 percent utilities and 5 percent real estate. 

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