Covid-19: Facts And Perspective For Investors
(Friday, February 28, 2020, 7:30 p.m. ET) — With Coronavirus infecting financial markets and stoking fears, be wary of investment pitches likely to follow.
Whenever fear is rampant, investors grow more susceptible to shrewd financial marketers and outright fraud.
On Facebook, other social networks, in emails and the phone, be prepared to hear more from advisors trying to capitalize on fear with Chicken Little stories or that will not provide their Form ADV.
Here's some crucial perspective on this past week's 11% plunge.
The S&P 500 remains on track with its long-term trend. While you cannot know for sure that the trend will continue, this timeline of other crises endured since 1957 offers crucial perspective.??
Since 1957, the long term growth trend of stocks, as measured by the S&P 500, is shown in the dotted red line, was a 6.9% compounded annual growth rate on investments in the Standard & Poor's 500.
Ultimately, earnings drive stock prices. Courtesy of Ed Yardeni, a leading financial economist, between January 23, 2020, when the Covid-19 scare began, and release of the most recent earnings forecast from Wall Street analysts, on February 20, 2020, the expected earnings on the S&P 500 declined six-tenths of 1%. To be clear, expected earnings have only been shaved back.
Notably, profits expected on technology stocks surged by 3.4% after the outbreak hit. Why? Some say Netflix, Amazon and other tech stocks that support staying at home and away from the virus could see a boost in earnings.
The S&P 500 dropped more than 11% in the last five trading days, on fears of Covid-19's economic effects. From its all-time closing high of 3380.16, reached only two weeks ago, the S&P 500 closed a week that will be infamous in financial history, at 2954.22.
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is a market-value weighted index with each stock's weight proportionate to its market value. Index returns do not include fees or expenses. Investing involves risk, including the loss of principal, and past performance is no guarantee of future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted.
Nothing contained herein is to be considered a solicitation, research material, an investment recommendation, or advice of any kind, and it is subject to change without notice. It does not take into account your investment objectives, financial situation, or particular needs. Product suitability must be independently determined for each individual investor.
This material represents an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete, and is not intended to be used as a primary basis for investment decisions.
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