With markets in turmoil over the Covid-19 virus, we are going to try to keep you up to date as important things occur. We’ll send out alerts as news warrants to attempt to keep you informed during this time of stress.
Overnight things deteriorated as oil prices collapsed after the Saudis and Russians walked away from negotiations about supply cuts and price protection. This was just another added stress that the markets didn’t need right now. At the moment oil is trading below $32 per barrel WTI, and some experts are concerned that prices could go much lower.
The flight to treasury securities continues as the 10 year note is now trading at a yield of .50%. That’s right, you get a half of percent for the next 10 years.
I suppose the benefit to consumers of lower oil prices and plunging interest rates is that gasoline at the pump will be extremely cheap and 30 year mortgages will be at all-time lows. Unfortunately, the damage of plunging oil and plunging interest rates to the banking system and, of course, the economy here in Houston could be felt for some time to come.
Futures plunged overnight, and stocks opened down 7% this morning. After the 15 minute circuit breaker halt kicked in, stocks resumed trading and a few brave souls have stepped in to do some buying.
As we have mentioned, volatility is likely to be at extreme levels for the foreseeable future, as market participants wrestle with virus headlines and the reality that economic damage is going to take a while to measure.
When we visit with clients about their financial plan, especially those entering retirement, we always talk about how bear markets will be part the equation as we look out 20 or even 30 years. On average, a bear market occurs at least once and often twice in a normal 10 year period. The causes of bear markets vary, of course, but the result is usually the same-an emotional period of time where stocks fall in a scary manner. So, bear markets are common, some would say necessary, and part of the price we pay to achieve our long-term financial goals. Our job, as your guide on this financial journey, is to take your hand during these difficult times and help you keep from letting human emotions cause you to make bad decisions. I know it sounds trite to say that we will get through this, but in fact we will.
I’ll have more to add during future updates. Stay calm and let us know if you need to hear a friendly voice.