The world seems to be entering a coordinated, coronavirus-sparked recession. Oil markets have collapsed–and soon production will too. The travel / leisure / entertainment industries are all reeling. Stocks are down, and Treasury bonds are up sharply–strong indicators that the economy is slowing rapidly.
In terms of the stock market, coronavirus is the perfect storm for the stock market. More than anything else, the stock market hates uncertainty. What could be more uncertain than a deadly pandemic that no one has ever seen before? Until hard scientific data comes out regarding spread, severity and progression, we will remain in uncertain times.
Likewise, when scientists begin to understand COVID-19 and its broader implications, the stock market will be able to recover. And, it will likely do so dramatically.
Yes, damage has been done to the economy and stock market, but recovery has the potential to be rapid. Moreover, we prepared client portfolios for a market selloff like this. By aggressively adding real estate and high-quality Treasury bonds to client portfolios over the last several months, our clients were able to weather the stock market storm with little damage.