OPINION: Don't let the new coronavirus outbreak ruin your investment strategy. Tune out the short-term market selloff to stay on your long-term goals.
In late February, news that coronavirus continued its spread around the world raised the temperature on the market. This week, the U.S. market declined about 10%, the steepest pullback since December 2018, when U.S.-China trade war tensions incited a selloff that wiped out a year of gains. Like the trade war, the coronavirus outbreak is serious news that will have measurable impacts beyond just this spike in volatility.
What to expect in the short term The coronavirus outbreak has disrupted global supply chains and hurt the earnings of American companies. Apple’s AAPL, +9.31% iPhone factory shutdowns in China caused the company to become one of the first major companies to reduce its second-quarter revenue guidance because of supply chain disruptions.
No likely recession While the economic impact of the coronavirus is meaningful and unpredictable, at this stage we believe the U.S. economy can avoid a recession in 2020. The current economic expansion is poised to persist this year due to solid consumer spending, supported by a healthy labor market, high savings rates and low interest rates.
All in all, the foundation of the long-growing U.S. economy remains intact, supporting further upside for equities over time, though volatility will remain prevalent in the near term. Market swings are not abnormal, even in this strong bull market, which has experienced several 10% corrections over the past decade.
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