It’s no secret that the S&P 500 has dominated in the past ten years, rising over 375% between 3/9/09 and 12/31/19 and cruising to another all time high this week on news of strong earnings, halved Chinese tariffs, and a potential coronavirus vaccine. Markets are cyclical though, and the fact that relative valuations of small and mid-cap indices have sunk to fifteen year lows has us wondering if it might be time to turn our attention to the underdogs. It might be a good time to reevaluate the bond market as well, given the fact that these days the “investment grade” label isn’t carrying the same weight it used to… Over in China, the Shenzhen Index has recovered some of its dramatic losses thanks to government and central bank intervention, and despite some alarming comparisons to the 2003 SARS epidemic, the spread of the virus does appear to be slowing—perhaps thanks to the quarantine that sent transport volumes plummeting. Finally, December saw some long-awaited gains in global manufacturing, but as stories emerge of companies like Toyota and Honda extending their manufacturing shutdowns in China, we’re left wondering if the trend will continue.
1. Market leadership does not last forever, but it may persist for a long time. Meanwhile, many other markets are poised to have their day in the sun, just like the under-performing S&P 500 did after the 2000-2009 decade…
Source: FactSet, as of 1/31/20
2. What is in your bond allocation/index?
Source: WSJ Daily Shot, from 2/6/20
3. Has the information age and the speed of data knowledge enabled the Fed to do a better job?
Source: WSJ Daily Shot, from 2/7/20
4. While the coronavirus is still spreading rapidly, the stock markets have been buoyed by the PBOC and central government stimulus, including tariff reductions which they call (correctly) “stimulative” to growth.
Source: WSJ Daily Shot, from 2/6/20
5. Fear and government quarantines had a significant impact on the busiest travel holiday. Yet with a gestation period of up to two weeks, many who were infected but not yet sick still traveled…
Source: WSJ Daily Shot, from 2/6/20
6. As with most major events, one can take a negative view…
Source: WSJ Daily Shot, from 2/7/20
7. …or a more positive view that the virus appears to be slowing…
Source: WSJ Daily Shot, from 2/7/20
8. The virus will have an economic impact and our question is: Is the impact going to derail the recent recovery in global manufacturing?
Source: WSJ Daily Shot, from 2/7/20