Fisher Investments recaps the biggest market, political and economic news from last week, including a historically significant drop in global equities stemming from rampant coronavirus fears as well as the ensuing government responses.
Global markets continued their slide last week and entered bear market territory. In our view, the best thing to do in moments of extreme panic is sit tight—which is uncomfortable, but often necessary to avoid making behavioral investment mistakes that affect your ability to reach your long-term investment goals. We recognize what’s right for tomorrow isn’t always easy today. However, patience and discipline is what will see investors through the volatility.
In the US, February core consumer prices (excluding food and energy) rose 0.2% m/m and 2.4% y/y. On Wednesday, President Trump announced new restrictions on travel from continental Europe to the United States for 30 days and, on Friday, declared a national emergency—unlocking up to $50 billion in funds for COVID-19 response efforts. Further, the US Federal Reserve injected $1.5 trillion into short-term funding markets on Thursday and Friday.
In the eurozone, the third estimate of Q4 2019 GDP came in at 1.0% y/y, revised up from 0.9% y/y. January industrial production increased 2.3% m/m, but declined 1.9% y/y. On Thursday, the European Central Bank left interest rates unchanged but announced its own stimulus package including increasing quantitative easing (QE) bond purchases and rolling out cheap loans for banks. In the UK, January industrial production fell 0.1% m/m and 2.9% y/y, respectively—both missing expectations. The Bank of England announced an emergency interest rate cut from 0.75% to 0.25%. While central bank stimulus efforts aren’t necessary in our view, they can help accelerate recoveries that would have occurred anyway.
In Japan, Q4 2019 GDP contracted 1.8% q/q. February bank lending grew 2.1% y/y, less than forecast. In China, consumer prices increased 5.2% y/y in February, in line with expectations. February exports and imports decreased 17.2% and 4.0% y/y, respectively, less than forecast.
The Week Ahead:
The Conference Board posts the February reading of the US Leading Economic Index (LEI). The US reports February retail sales data. The eurozone releases February inflation and January trade figures. Japan and China report January retail sales and industrial production data.
Source for all data cited is FactSet. This update constitutes the general views of Fisher Investments and should not be regarded as personalized investment advice. No assurances are made we will continue to hold these views, which may change at any time based on new information, analysis or reconsideration. In addition, no assurances are made regarding the accuracy of any forecast made herein. Global equities are represented by the MSCI World Index. The MSCI World Index measures the performance of selected stocks in 23 developed countries and is presented net of dividend withholding taxes and uses the maximum rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. Past performance is no guarantee of future results. A risk of loss is involved with investments in stock markets.