Market Update: Tues, Mar 24, 2020 | LPL Financial Research

DAILY INSIGHTS

Stimulus prospects help lift global markets. S&P 500 Index futures hit their “limit up” circuit breaker of 5% overnight following Monday’s losses while major Asian and European indexes posted gains. Extraordinary measures by the Federal Reserve (Fed) to backstop the economy and progress on an approximately $2 trillion fiscal stimulus package by Congress, along with oversold conditions, are the primary drivers of the bounce. While most of the conditions for a durable rebound that we have outlined in our Road to Recovery Playbook have been met, uncertainty remains high, and we know historically that bottoming has been a process.

Purchasing manager indexes start to capture global slowdown. The negative economic data everyone knew was coming is starting to arrive. Markit’s preliminary purchasing managers’ index (PMI) surveys for March showed a historic slowdown in the Eurozone; US data will be released later today. While the manufacturing PMI was surprisingly resilient at 44.8 (below 50 indicates contraction), the services PMI collapsed to 28.4. Recessions historically have started in the manufacturing sector, but the pandemic containment efforts will be felt first on the services side, which will have a strong impact on employment levels in developed economies.

Time in the market versus timing the market. The COVID-19-induced sell-off has caused many investors to wish they had timed the market better and simply avoided the recent volatility. That sounds great in theory, but in practice it is quite hard to do. For instance, the annualized compounded return on the S&P 500 Index from 1990—2019 was 7.7%. If you missed the best day of each year, that return was cut in half, while if you missed the best two days of the year the return was less than 1%. We discuss this important concept for long-term investors today on the LPL Research blog.

Fastest 30% correction in history. It took the S&P 500 a record 16 days to go from new highs to a bear market (down 20% from the highs). Now, another dubious record has been set. It took only 22 days for the S&P 500 to go from new highs to down 30%, topping the previous records from 1929 (31 days) and 1987 (38 days). Studies of human emotion show that fear is heightened when things are both unexpected and fast—like being startled when someone jumps out of the shadows. This is why in times like these it can be so important to stick to long-term investment plans.

 

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 may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites 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.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. 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.

Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC).

Insurance products are offered through LPL or its licensed affiliates.  To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no representation with respect to such entity.

If your representative is located at a bank or credit union,  please note that the bank/credit union is not registered as a broker-dealer or investment advisor.  Registered representatives of LPL may also be employees of the bank/credit union.

These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of, the bank/credit union.  Securities and insurance offered through LPL or its affiliates are:

  • Not Insured by FDIC/NCUA or Any Other Government Agency
  • Not Bank/Credit Union Guaranteed
  • Not Bank/Credit Union Deposits or Obligations
  • May Lose Value

For Public Use – Tracking 1-971045