LPL Financial Market Signals Podcast

Outbreak Measures l LPL Market Signals Podcast

January 27, 2020

LPL Research

The coronavirus outbreak in China has many on edge, which has resulted in a global sell-off in equites. This week the LPL strategists discuss this and why some near-term weakness was actually quite likely.

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THE VIRUS SPREADS

Hopes to keep the coronavirus contained were met with disappointment over the weekend, as the deadly virus spread quickly and aggressively. The entire country of China has virtually shut down, impacting the second-largest economy. As the LPL strategists discuss, this outbreak is quite similar to SARS. That outbreak started in November 2002, peaking in February 2003, and by July 2003 it was contained. Equities globally bottomed in March 2003, while global output quickly made up any weakness over the coming quarters. History shows us that a slowdown and near-term market pullback is quite likely, but longer term these outbreaks haven’t been major disrupters.

IS EVERYONE BULLISH?

After the run stocks have had the past few months, we are beginning to see some warning signs. Remember, when everyone is bullish, this is likely when the good times could end. For starters, the S&P 500 Index is more than 10% above its longer-term 200-day moving average, suggesting things are stretched in the near term. Additionally, various sentiment polls are showing the highest number of bulls we’ve seen in years. The LPL strategists note why this could be why markets are ripe for a pullback, but the good news is we do not anticipate this to be the start of a major bear market.

 

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SOME STATS TO DIGEST

Think about this — the S&P 500 has gone 30 days in a row without back-to-back losses. That tied the longest streak since 1955. Additionally, the index hasn’t moved 1% (up or down) for more than three months! As the LPL strategists discuss, this wasn’t going to last forever and some type of volatility was likely to happen at any time. The outbreak in China was the spark, but markets don’t stay calm forever and this was more than due.


Tune In Now

Listen to the entire podcast to get the LPL strategists’ views and insights on current market trends in the US and global economies. To listen to previous podcasts go to Market Signals podcast. You can subscribe to Market Signals on iTunesGoogle Play, or Spotify.

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IMPORTANT DISCLOSURES

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth in the podcast may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. All indexes are unmanaged and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This Research material was prepared by LPL Financial, LLC.

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