Current Market Conditions

We wanted to take a moment to touch base regarding the current stressful stock market conditions.  It seems clear that the volatility we have seen this week is a reflection of the market’s struggle to come to terms with how far-reaching the impact of the coronavirus will be. Our view of the situation is that while this is certainly a serious situation, we would consider it one whose impact is likely to be limited in nature. We would not draw a parallel between these conditions and those we experienced in 2008.  This is an isolated event whereas the "financial crisis" in 2008 was the result of broad-based systemic weakness.

Attached is a chart displaying the stock market's performance following previous epidemics. While each of these cases are unique, the general take-away from this chart is that none of these have led to a long-term sustained downturn in the market. In that regard we don't expect this to be any different. Financial markets dislike uncertainty more than anything else so we would expect this period of volatility to continue until there is more clarity surrounding the situation. We continue to believe the coronavirus will be contained in the coming quarters and that economic activity will rebound in the second half of the year. As always we are maintaining our long-term outlook and guarding against making emotional decisions in the face of what is likely to be a relatively short-term market disruption.

 

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Wells Fargo Advisors did not assist in the preparation of this report, and its accuracy and completeness are not guaranteed. The opinions expressed in this report are those of the author(s) and are not necessarily those of Wells Fargo Advisors or its affiliates. The material has been prepared or is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy.