“Unwanted Surprise” Vista Partners Daily Market Recap – March 3, 2020

Well, that was a helluva “howdy-do” this morning. The Fed surprised most of us with an interest rate cut of a half-point bringing the fed funds rate to 1-1.25%. This was a move that was supposedly in response to the growing economic threat from the coronavirus and after it was reported earlier in the day that the G7 Finance Ministers had failed to meet “the public’s” expectations & put forth measures to address the coronavirus situation to their liking. Regardless, the Fed’s hand was played at the wrong time & in the wrong way. Instead of further steadying the world & markets, the move further alarmed many of us igniting fear and selling again just after a day where it had been able to get us more comfortable & after promising to use their tools to ensure growth last Friday.  They even had the leader of the WHO on their side basically saying that we all needed to come to grips and look at the facts when they spoke out on Sunday. But the Fed through caution and logic through the wind and Here’s what I believe they did wrong today. Their first misstep was that they positioned the move today as an “emergency” move and just after the market regained some momentum on Monday. The second misstep is that they did not wait until their next meeting on March 17-18 to make a cut in the normal course of business and ride Monday’s momentum. The third misstep was that they cut the rate a full half-point rather than a quarter-point drop that the market expected. It was a great mess of a job at the end of the day and the markets let them know it too by selling off sharply. It also triggered the resurfacing of fear-mongers prophesizing doom & gloom from mainstream media and otherwise as they proceeded to come out of the woodworks again & preach that the world was on the move towards slowing global growth as the coronavirus was spreading “uncontrollably.” Amazing how the art of selling fear can pay one in many ways. I guess one silver lining from today’s cut is that for those of us with a mortgage outstanding we can now go ahead and get refinanced at a fairly attractive rate and put a few more bucks in our hands on a monthly basis…Another value is it discounted many stocks again in the short term and maybe providing attractive entry points…Having said that the market is swinging so wildly on new facts that we might even see a reversal again tomorrow. It is definitely time to buckle up. 

The major indices ended the day in the red and as follows: the S&P 500 closed down -2.81%, the Dow Jones Industrial Average lost -2.94%, the Nasdaq Composite dropped -2.99%, & the Russell 2000 gave back a solid -2.13%.   The beloved FAANG stocks experienced a red today too. Facebook (FB) closed at $185.89/share, -5.37%, Alphabet (GOOG) closed at $1,341.39/share, -3.44%, Amazon (AMZN) closed at $1,908.99/share, -2.3%, Apple (AAPL) closed at $289.32/share, -3.18% & Netflix (NFLX) closed at $368.77/share, -3.22%.

The Velocity Shares Daily 2x VIX Short-Term ETN (TVIX) closed at $119.32/share shooting up +23.14% as fear and selling prevailed. Oil prices also moved higher again up +.9% to $47.23/bbl as  OPEC reared its head again suggesting that they should reduce Q2 oil output by 600k barrels/day. Gold closed at $ 1,646/oz jumping $53/oz and silver prices closed at $17.30/oz up.

Economic Reports

On Monday, we received the following:

• The ISM Manufacturing Index Report for February confirmed an expansion reading of 50.1.
• Total construction spending report also confirmed an increase of +1.8% month/month in January
• The Residential spending report confirmed an upward move of +2.0% month/month
• The nonresidential spending reports showed an increase of +1.6% month/month.

Investing & Inspiration

“The riskiest thing we can do is just maintain the status quo.
I get up at 4:30 in the morning, seven days a week, no matter where I am in the world.
I think it is important for people who are given leadership roles to assume that role immediately.
What I’ve really learned over time is that optimism is a very, very important part of leadership.” Bob Iger, Ceo of Disney

“There are old traders and there are bold traders, but there are very few old, bold traders.”-Ed Seykota

“Let this scenario play out on its own, in its own fashion. As you watch it unfold, you will soon be grateful that you choose the peaceful path. Remember — those who live by the sword, die by the sword.”

“As long as you enjoy investing, you’ll be willing to do the homework and stay in the game.” -Jim Cramer

“I rarely think the market is right. I believe non-dividend stocks aren’t much more than baseball cards. They are worth what you can convince someone to pay for it.” -Mark Cuban

“Michael Marcus taught me one other thing that is absolutely critical: You have to be willing to make mistakes regularly; there is nothing wrong with it. Michael taught me about making your best judgment, being wrong, making your next best judgment, being wrong, making your third best judgment, and then doubling your money.” -Bruce Kovner

“The policy of being too cautious is the greatest risk of all.” -Jawaharlal Nehru

“The only true test of whether a stock is “cheap” or “high” is not its current price in relation to some former price, no matter how accustomed we may have become to that former price, but whether the company’s fundamentals are significantly more or less favorable than the current financial-community appraisal of that stock.” -Philip Fisher

“I learned to avoid trying to catch up or double up to recoup losses. I also learned that a certain amount of loss will affect your judgment, so you have to put some time between that loss and the next trade.” -Richard Dennis

“The four most dangerous words in investing are: ‘this time it’s different.” -Sir John Templeton

“Money doesn’t make you happy. I now have $50 million but I was just as happy when I had $48 million.” -Arnold Schwarzenegger

Tomorrow

Tomorrow’s significant economic data report schedule will include the following:

• The Weekly MBA Mortgage Index,

• The February ADP Employment Change

• The February ISM Non-Manufacturing Index

• The March Fed Beige Book