Good Morning to our Copper Harbor clients and friends:
When we last wrote a week ago most in the investment community did not foresee the swift and steep downturn US markets would experience over the past 5 business days. Since then there have been daily articles and briefings, both in the investment community as well as by federal and local state government, on not only the world impact of the coronavirus outbreak but also detailing exposure here in the US as well as the US response.
Steve, Jesse, Ramon and I have spent the past week listening to and reviewing comments by economic experts. We are also researching the short term economic effects of the outbreak and reviewing other historical flu occurrences that have similar characteristics such as the outbreaks of 1956 and 1958. We have also examined what economists are predicting for GDP impact going forward into 2020.
The takeaways we have as of this morning are:
- While travel bans by Italy, South Korea and others will have a negative economic impact, the positive is that with Governments acting swiftly the spread of the virus in Europe and other countries will hopefully be minimized.
- Even though there has now been confirmed deaths here in the US the number of new cases here at home have remained small (relative to other countries) over the weekend. With travel bans on incoming flights from China having been restricted since mid to late January, the CDC and others are hopeful that the spread of the virus in the US will be better controlled because of advance notice and preparation.
- GDP forecasts for first quarter Chinese GDP, the economy most affected by the outbreak, have been cut from 5.9% down to 3.9% year on year. The positive news is that many analysts are expecting a sizable bounce back in Q2 of 5.2% y/y growth baring a further surge in the virus affecting Chinese production.
The full impact of the Coronavirus has yet to be seen, but we are encouraged that US markets have opened positively this morning. We recognize that stock investors are always looking six to nine months ahead – so we should not be surprised if markets begin to recover while news of the virus continues to dominate in the world press. We are encouraged by the swift and decisive world government response with hopes that the global economic impact of the virus will be focused on Q1, and with any market that is “on sale” an opportunity for clients that have an appetite for risk.
We continue to emphasize that our clients keep a longer-term focus within their overall investment objective knowing that while stock volatility is affecting equity holdings our bond positions have almost exclusively risen during this period. As always, we encourage you to call or email any of the team to talk about your individual portfolio:
:
Steve Hooyman 920-687-7205 steve.hooyman@copperharbor.us
Amy Sitter 920-687-7027 amy.sitter@copperharbor.us
Jesse Nelson 920-441-0300 jesse.nelson@copperharbor.us
Ramon Mateos 920-441-0301 ramon.mateos@copperharbor.us
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