Coronavirus

The market sold off Friday.  The excuse is the coronavirus impacting China.  My guess is the we'd have seen a sell-off at some point anyway given how much markets have advanced since Labor Day.  Friday's loses were headline grabbing in terms of points but it's worth noting that it was only a bit over a 1% decline in most indices.  

Probability suggests we might see more volatility in the days ahead.  Probability also suggests markets may now be in a bit of a reset mode.  We might have to churn around now for some time.  If I had to guess, and it is only a guess, the higher probability event in terms of the equity markets is that we will see the highs for a very good portion of the year between now and sometime in May.  We may in fact have seen the highs already.  Markets are going to have to deal not only with the coronavirus but will start to focus on the election as we get closer to the fall.  I think it's possible we could see markets move to new highs after the election, but those are in November.  November is a long way off right now.

My thoughts above are based on nothing more than 30+ years of observations and have a very high probability of being wrong so I wouldn't suggest you plan your investments around what I've written above.  Also for those of you that think I'm being negative I'd note that the entire history of this bull markets has been a series of moves higher followed by a period of consolidation.  It will only be par for the course of this bull if we now back and fill for some time given how far we've moved higher since December, 2018.

As for the coronavirus I think we need to see the longer term facts before we get overly concerned.  Obviously nobody should ignore something that is killing people like this and it is of course tragic.  However, as of this writing there are 12,000 known infections worldwide and 250 known deaths.  For comparison the CDC calculates that something like 8% of the US population will contract the flu in any given year.  That translates to over 26 million people in the US alone that will come down with the flu in 2020.  Flu killed over 60,000 people in the US  last year.  There is a lot of fear talk rumbling around regarding this virus right now.  I think we need to step back and wait for the facts before we assume the worst.  I know the market has already cut and run but that's what markets usually do during uncertain times.  My guess is we'll have a better read on this in the coming weeks and can then judge how big of an impact it's going to be on the global economy.

I've alluded to certain events in my life right now that have kept me away from this blog a bit more than I would like.  Right now I'm committing to one post a week.  I'll try to do more but it will depend on the time.  At a minimum look for something here next Monday or Tuesday.

Thanks.