Markets on track for worst week since 2008. The S&P 500 Index is already down 10.8% this week, and with equities lower again in early trading, the benchmark index is tracking to its worst week since October 2008. While corrections are a normal part of investing, this sell-off has been historically swift—since 1950; only three other weeks have experienced a sharper sell-off than what we’re currently tracking to. As we discuss today on the LPL Research Blog, the six-day correction from record highs in the S&P 500 on February 19 was the fastest ever recorded.
International markets sharply lower overnight. Equities around the globe continue to correct, with international markets sharply lower overnight and into this morning. The Japanese Nikkei and Shanghai Composite both dropped more than 3% overnight, while the Euro STOXX 50 is also down over 3% late in trading.
What now? Based on the information we have now, our view at this point is to expect a return to pre-outbreak levels of global economic growth and corporate profits over the next several months. With uncertainty around the scope of the outbreak extremely high, the best guidance we can provide for suitable investors at this point is to consider staying the course, stick with long-term plans, and for tactical investors where appropriate, begin to consider opportunities to add equity exposure on weakness. We believe market prices have disconnected from fundamentals, which can provide attractive tactical opportunities based on history. We still believe the economic backdrop is supportive, even if we get modest downside from our base case for the coronavirus’ impact.
Technical support. After reversing off the first technical support at 3030 midday on Thursday, the S&P 500 Index slipped 2.3% in the final two hours of trading Thursday, breaking below both that support as well as the 200-day moving average. The next levels of support we see are 2940, where markets opened early Friday, followed by 2822, the lows from the August 2019 pullback.
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