The following is an update summarizing current equity markets and volatility.
The real world generally fluctuates between “pretty good” and “not too bad.” But, equity markets fluctuate more, between “overly optimistic” to “overly pessimistic” due primarily to human emotions. Current fears and concerns have resulted in equity market declines nearing 20% year-to-date.
Over the last two weeks, equity markets have become emotionally hijacked due primarily to:
• Coronavirus – Nobody presently knows the end result, but evidence suggests containment may be achieved with government intervention. This is based on recent results in China.
• Fear of recession – A prolonged pandemic, among other factors, may soon cause global economies to enter a recession.
• Reaction to lowered interest rates – The Federal Reserve unexpectedly lowered interest rates and the reaction has been largely negative.
