The Word from Main Street
Market Update for the Week of February 24, 2020
Anxiety over the coronavirus and its potential drag on global economic growth has renewed market volatility. With a spike in the number of confirmed cases, particularly evident in South Korea, Italy, and Iran, investors are becoming increasingly concerned over a rapid spread outside of China.
Chief Investment Officer with Navellier & Associates, Louis Navellier, recently shared his view regarding the impact of the coronavirus:
- Based on the history of other virus outbreaks (e.g. SARS), Navellier believes the coronavirus will likely be old news in a few months.
- He believes this is similar to a bad flu season. If contracted, the death rate from coronavirus is currently at 2%.
- The spread of coronavirus is indeed having a global impact, with Germany and Japan likely dipping into recession, but money is flowing into the U.S. for the perceived safety.
- The flow of money into the U.S. is pushing government bond yields to near all-time lows. The dividend yield on the S&P 500 Index is currently higher than the yield on U.S. government bonds. He believes this will eventually push money back into the market as investors seek higher yields.
- Navellier believes the year-over-year comparisons for sales and earnings for the next four quarters will be much higher, which he believes will lead to a higher market.
- The Federal Reserve is under renewed pressure to lower rates.
- Election years are historically strong years for the market.
In volatile times like these, it is important to have a disciplined investment approach and to execute on it when the data says to do so. To help avoid the pitfalls of opinion or bias, our process is approximately 90% science and 10% art. As new market data becomes available every day, prices and trends will move. By following the strength of the market, we believe our process will help us move away from the troubled spots around the globe (or laggards) and move into the new areas of opportunity (or leaders). According to Nasdaq Dorsey Wright, the application of a Relative Strength methodology continues to show that it adds real value over time.
Below is the most recent chart of the S&P 500 Index (SPX) showing the current levels of support. The first line of support is 3,225, followed by 3,075. While our focus will remain on the data coming from the D.A.L.I. Indicator, we will indeed keep an eye on other important charts and indicators to support our decision to stay put or to make some adjustments.
Source: Nasdaq Dorsey Wright
Below is the most recent DALI indicator with the buy signal changes since the prior reading: #1 Domestic Equities (+1), #2 International Equities (-1), #3 Fixed Income (+/-0), #4 Cash (+1), #5 Commodities (-1), #6 Currency (-1).
Source: Nasdaq Dorsey Wright
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CAR-0220-03726Wells Fargo Advisors Financial Network 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 Financial Network 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.Past performance is no guarantee of future results. All investing involves risk including the loss of principal. Asset allocation and diversification are investment methods used to help manage risk. They do not guarantee investment returns or eliminate risk of loss including in a declining market.Technical analysis is based on the study of historical price movements and past trend patterns. There is no assurance that these movements or trends can or will be duplicated in the future. Nasdaq Dorsey Wright developed the indicators described above. They have been prepared without regard to any particular investor's investment objectives, financial situation and needs. Accordingly, investors should not act on any recommendation (express or implied) or information in this report without obtaining specific advice from their financial advisors and should not rely on information herein as the primary basis for their investment decisions. Any statements nonfactual in nature constitute only current opinions and interpretations of their indicators, which are subject to change without notice. There may be instances when fundamental, technical and quantitative opinions may not be in concert. Any opinions expressed or implied herein are not necessarily the same as those of Wells Fargo Advisors or its affiliates. Any market prices are only indications of market values and are subject to change. The material has been prepared or is distributed solely for informal purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Data and opinions are current as of 12/16/19. Additional information is available on request. Nasdaq Dorsey Wright’s “DALI" employs relative strength-based analysis to rank macro asset classes based on developing leadership trends within the global capital markets. The objective guidance within DALI provides the tools necessary to properly allocate portfolio across all major asset classes in an effort to emphasize strength wherever it exists. Domestic Equities, International Equities, Commodities, Currencies, Fixed Income and Cash are evaluated daily to identify dynamic developments across investment genres, as well as within them. This tool provides the tactical precision that allows investors to adapt as the market leadership changes.Wells Fargo Advisors Financial Network 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 Main Street Wealth Advisors and are not necessarily those of Nasdaq Dorsey Wright, Wells Fargo Advisors Financial Network 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. Additional information is available upon request. Investment products and services are offered through Wells Fargo Advisors Financial Network, LLC (WFAFN), Member SIPC. Main Street Wealth Advisors is a separate entity from WFAFN.