Market Notebook


 It was a wild ride in both bond and equity markets last week. Bond prices, with the exception of high yield, moved higher while equity prices moved sharply lower on coronavirus fears.  As measured from the beginning of the year, growth and tech performed better than expected given the circumstances.

The Leading Economic Index in January was positive and moved to a new high.  Given the effects of coronavirus on world trade, it seems likely that February LEI will indicate contraction.  Nonetheless, LEI expansion in January resets the LEI measures within this notebook.

The big question for the week ahead, “Is this pullback a buying opportunity or a sign that the worst is yet to come”?  While it is impossible to answer that question, it is possible to take advantage of last week’s volatility as a long-term investor.  Investment opportunities where price has significantly pulled back are candidates for additional investment.  Consider high quality investments that are intended to be held over long periods of time.  Be mindful that any new purchases could decrease significantly in value before the overall situation gets better.  Because of the high degree of uncertainty surrounding the coronavirus situation, it is most likely time to dip a toe in the water versus jumping in headlong.  Size purchases accordingly.  Remember that good news, however slight, could easily cause a sharp rebound in equity prices.  Conversely, more bad news could cause equity prices to deteriorate further.  For portfolios that can carry both equities and bonds, consider rebalancing.

Take the time in the coming week to invest not only in the markets but in your personal safety.  Think about what you need should the coronavirus come to your community and do something about it.  The absolute best investment over the next month could easily be frequent hand washing.

Thanks for reading.

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