Coronavirus Concerns Investors

Market Recap Week ending 1/24/2020

Markets came off a new set of all-time highs set last week after investors became more concerned regarding the containment of Coronavirus and its potential implications on global economies.  The S&P 500 lost 1.03% on the week while the Dow shed 1.22%, the NASDAQ gave back 0.79%, and the Russell 2000 dropped 2.2%.  Safe-haven US Treasuries gained across the curve with longer-dated maturities performing a bit better.  The 2-year note yield decreased by eight basis points to close at 1.48% while the 10-year bond yield decreased by sixteen basis points to close at 1.68%.  Gold gained roughly $12 to close at 1572 an Oz.  Oil struggled, losing $4.34 or 7.4% on the week to close at $54.21 a barrel.  There were no changes to our models last week.

Investors seemed inclined to take some profits late last week as news continued to filter in on the spread of the Coronavirus.  News surfaced that the virus has spread to the US and a handful of other countries outside of China.  Chinese officials have quarantined a large part of the population where the virus is thought to have originated, which undoubtedly will start to have an effect on the economy in that region and has the potential to affect other areas where the virus has spread.  At this time, it’s anyone’s guess on how this event will unfold but the headlines warrant caution and have allowed investors to take some profits in what has been a hot market over the last several months. 

According to FactSet, Q4 2019 earnings have been reported by ~17% of the S&P 500, with 73% of those reported providing better than expected Earnings per Share (EPS) and 67% reporting better than expected revenues.  7 Companies have issued negative EPS guidance while five companies have issued positive EPS guidance.  The forward 12-month P/E ratio appears a bit rich at 18.6x which is above the 5-year average of 16.7X and the 10-year average of 14.9x.  Stay tuned as earnings season has just started. 

Darren Leavitt, CFA

Portfolio Manager

& Sr. Market Analyst