Market Update April 3, 2020 – Keeping a Long-Term View

Published by Waycross Partners on

Market Update April 3, 2020 – Keeping a Long-Term View

The positive momentum in equities declined last week amid soft economic data and the extension of social-distancing guidelines, with major U.S. indexes falling around 2% to 3%. Stocks struggled to gain traction as coronavirus cases continued to surge in the U.S. and most other countries, widening the economic impact.

Oil surged on prospects of a global deal to cut output and support prices, but the positive sentiment was undercut by the release of regional economic activity surveys that signaled a sharp decline in global growth. Employment indicators also showed stress in the labor market, with the U.S. economy losing 700,000 jobs in March and unemployment rising from record lows. With 10 million Americans filing for unemployment benefits in the last two weeks, unemployment is likely to continue to rise over the next few months.

Going into earnings season, 2020 is expected to bring the biggest year-over-year decrease in earnings since 2008. As of March 30, FactSet projected that earnings for companies in the S&P 500 will decrease by 1.2% this year. The research firm expects a 5.2% first-quarter decline followed by a 10.0% drop in the second quarter.

Chart of the Week

Valuation Disparity

Industry Highlight: Semiconductors

The recent pullback in semiconductor valuations, like other sectors in the S&P, has created buying opportunities.  Moreover, numerous chip makers are the primary innovators within some of the fastest growing segments in information technology, including cloud computing, 5G wireless, online gaming, and artificial intelligence.  As a result, with more realistic growth rates now priced into semi shares, we see opportunity in the semi companies we feel will be leading the charge in these high-growth segments.  And, using history as a guide, we believe these stocks have potential to perform well as the global economy emerges from the coronavirus slowdown.

While market volatility remains elevated, investors should remember that this disruption will end and the economy will eventually recover once the virus is contained. In times like these, a long-term view is critical and investors’ focus should be on minimizing downside volatility in their portfolios while maintaining exposure to high-quality companies that can weather this downturn and thrive in the economy that will emerge.

Waycross Partners, LLC (“Waycross”) is an independent, privately owned investment management firm registered with its principle place of business in Louisville, Kentucky. Waycross offers investment strategies to our clients, which are made up of institutional and high net worth individuals. This material is for informational purposes only and is neither an offer nor solicitation to invest. Please read all offering memorandum, ADVs, and other risk disclosures before investing. Any projections, market outlooks or estimates in this document are forward looking statements and are based upon certain assumptions. Other events which were not taken into account may occur and may significantly affect the returns or performance . Any projections, outlooks or assumptions should not be construed to be indicative of the actual events which will occur. The enclosed material is confidential and not to be reproduced or redistributed in whole or in part without the prior written consent of Waycross Partners. The information in this material is only current as of the date indicated, and may be superseded by subsequent market events or for other reasons. Statements concerning financial market trends are based on current market conditions, which will fluctuate. Any statements of opinion constitute only Waycross Partners’ current opinions, which are subject to change and which Waycross Partners does not undertake to update.

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