Market Update April 3, 2020 – Keeping a Long-Term View
Market Update April 3, 2020 – Keeping a Long-Term View
- Waycross Partners
- April 3, 2020
- Market Review
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
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.
