Things Are Looking Better, But This May Not Be Over Yet…
I had hoped to avoid any lengthy discussion of the coronavirus in my recent update to High-Yield Investing readers. Frankly, I’m a little tired of talking about it. And I’m betting you’re equally tired of reading about it.
Unfortunately, the Covid-19 outbreak remains the biggest (if not the only) market mover right now. There’s just no avoiding it.
Still, we had some good news come out over the weekend. The number of new cases rose by 30% in New York last week. How is that good? Well, it shows a deceleration from growth of 46% the prior week. In other words, the virus is still spreading, but at a slower pace.
We’ve also seen some promising numbers pertaining to the number of hospitilizations. While it still may be too early to tell, it’s looking like the numbers are slowing. At this point, we’ll take any good news we can get.
Those results echo what we’ve been seeing worldwide. Countries like Austria have declared the worst to be over and are preparing to roll back social restrictions. Globally, the number of infections now tops the 1.5 million mark (you can see a map with all sorts of data here). But there are indications that the draconian measures taken to bend the growth curve are having a positive impact.
Moreover, more than 340,000 former patients have fully recovered and been discharged. Of the rest, about 95% are only showing mild symptoms.
Funny how the media neglects to mention that.
Off To A Good Start In April
In any case, leaders have begun to see light at the end of the tunnel. And the bulls came out swinging Monday morning. The Dow sprang 1,600 points, buoyed by strength in banks, REITs, leisure and many other beaten-down industries. And we saw encouraging follow-through buying conviction the rest of the week. As it stands now, it looks like we’ve recovered about half the losses during the selloff.
We’ve been beneficiaries of this over at High-Yield Investing. I’m seeing holdings that have bounced 16%, 26%, and 45%, respectively as I write this. But make no mistake, this whole experience has been painful. We still have a lot of ground to cover.
But I would resist the urge to make big portfolio changes. We’ve already made some critical tweaks to our approach over at my premium service, and I’ve told you about how I’m responding to this crisis in these pieces:
Earnings Season Is Going To Be Ugly
If you’ve followed that advice, good. But I’m still urging caution. I don’t see any reason to dive back into equities in a major way just yet. Mr. Market’s mood changes almost daily. We’ve seen many head-fakes before, only for selling to resume shortly after. And earnings season is about to begin, which (if possible) could amplify the volatility we’ve been seeing.
First-quarter results will be almost uniformly bad. But for the first time, we’ll know how bad. This will be the first glimpse into the financial carnage wrought by the economic shutdown on affected businesses. Second-quarter numbers from April to June are likely to be even worse. But after that, we should be in recovery mode – particularly with $2 trillion in stimulus proceeds injected into the economy.
In the meantime, I continue to pay close attention to the businesses and industries in our portfolio. As I’ve said previously, I think it’s okay to selectively dip your toe in the water – but you should also be looking to trim or eliminate weak portions of your portfolio whenever possible.
Another thing to do during uncertain times like this is to increase your exposure to gold. It’s the classic safe haven, acting not only as an important hedge — but potentially rewarding investors with serious gains. My colleague Dr. Stephen Leeb has a special report on one of the most interesting gold finds of his career. You can check it out here.