The Markets React to the Coronavirus

Posted in , By David M. Smith

Imagine if the U.S. government ordered the states of Illinois, Indiana, Michigan, Ohio, Wisconsin and Minnesota to be quarantined.  No travel in or out of the area, people are discouraged from going outside, retail businesses have to close, and people can only work if they telecommute.  That is the current situation of Wuhan province in China, home to 50 million people in an area known for producing automobiles and agricultural products.  LA Times  It is an attempt to contain the outbreak for the new Coronavirus that researches know little about but are learning more about every day.  WSJ  The Economist

Stock markets around the world are watching for the economic effects.  U.S. stock markets dropped abruptly Monday on further news of the outbreak and quarantine.  Investors are reacting to how much the world's second-largest economy will be affected, which already was sluggish when in 2019 it had its slowest growth rate in 29 years.  South China Morning Post  Investors are also concerned about U.S. multinational businesses with big operations in China.  Starbucks closed over 2,000 stores and McDonalds, Pizza Hut and KFC were shutting down operations as well.  CNBC

By midweek, stock indexes were recovering.  But investors will be keeping an eye on any impact of the virus on the world economy and company earnings. 

  • Fed Meeting:   As expected, this week the Federal Reserve's Open Market Committee held rates steady.  The markets are focusing on the banks' balance sheet and the coronavirus.  Recently, the bank expanded its balance sheet by 400 billion dollars to provide liquidity to the short-term market.  In response to the coronavirus outbreak, Jerome Powell, the chair, stated that "if developments emerge that cause a material reassessment of our outlook, we would respond accordingly."   Yahoo Finance  WSJ
  • Credit Scores May Change for 80 Million in 2020:  The Fair Isaac Corporation, or FICO, is tweaking its credit rating formula later this year.  The new formula will look more closely at individuals with both personal loans and credit card debt and scores will be affected, both positively and negatively, for about 80 million individuals.  As financial advisors, we always counsel clients to check your credit rating for mistakes and correct information.  Maybe this is a good reminder to check your credit history to make sure it is correct before the new changes go into effect. NYT
  • Maine's New Silicon Valley?   Much of the big economic gains of the last couple of decades have been driven by a handful of tech-heavy large cities.  This week it was announced that a $100M research center will be created in Portland with the aim to duplicate that same kind of growth in Northern New England.  The center is affiliated with Northeastern University and will offer graduate certificates in artificial intelligence and machine learning.  NYT 
  • Adam Grant Busts Workplace Myths:  Someone recently referred me to Adam Grant, a highly regarded organizational psychologist at Wharton.  One of the things he likes to do is bust management fads with evidence.  In this podcast he rails against the Myers-Briggs test, open office plans, and preferred learning "styles."  TED
  • CBO Issues Warning on U.S. Deficits:  In an announcement this week the non-partisan Congressional Budget Office issued that the current U.S. deficits in a strong economy are unprecedented and unsustainable.  The report elicited very little reaction from Congressional members, but one day it will… Wash Post  
  • Mocktails are Here!  For those participating in Dry-January, this article is a little late to the party (pun intended!).  When you want a nice drink but don't want the alcohol, check out these mocktail recipes.  WSJ 
  • Whiskey & Bourbon Challenged by Tariffs:  And for those still imbibing, here's an article on how the trade war is affecting the booming bourbon and whiskey industries.  Bloomberg
  • Vince Lombardi Quotes:  With the Super Bowl playing this weekend, I thought it was appropriate to have a couple of quotes from what may be the most motivating coach of all time, Vince Lombardi. 

    • Commitment:  "Winning is not a sometime thing, it is an all the time thing.  You don't do things right once in a while… you do them right all the time."
    • Habit:  "Winning is a habit.  Watch your thoughts, they become your beliefs.  Watch your beliefs, they become your words.  Watch your words, they become your actions.  Watch your actions, they become your habits.  Watch your habits, they become your character."

Thank you for reading The Friday Buzz!  Enjoy the Super Bowl this weekend!  (Will my beloved Browns ever make it?).


About the Author David M. Smith

David is a Senior Financial Advisor and the firm’s Co-Chief Investment Officer. He has more than 20 years’ experience in the financial services industry and holds the highly respected Certified Investment Management Analyst™ and Certified Financial Planner™ designations; he is a Co-Managing Member of the firm.
Disclaimer and Disclosures: Past performance is no guarantee of future results. The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. Our opinions are subject to change without notice as market and economic conditions shift. Robinson Smith Wealth Advisors, LLC is a Registered Investment Advisor with the U.S. Securities and Exchange Commission (SEC). Registration with the SEC does not imply any certain level of skill or training. Personalized financial planning and individual investment advice are not offered through this website. The general financial and investment information furnished through this website or associated with this website by links is believed to be accurate, however, Robinson Smith Wealth Advisors makes no guarantee to this fact and does not have control over the accuracy of websites found through links within.