Covid-19: Facts And Perspective For Investors
(Friday, February 28, 2020, 7:30 p.m. ET) — With Coronavirus infecting financial markets and stoking fears, be wary of investment pitches likely to follow.
Whenever fear is rampant, investors grow more susceptible to shrewd financial marketers and outright fraud.
On Facebook, other social networks, in emails and the phone, be prepared to hear more from advisors trying to capitalize on fear with Chicken Little stories or that will not provide their Form ADV.
Here's some crucial perspective on this past week's 11% plunge.
The S&P 500 remains on track with its long-term trend. While you cannot know for sure that the trend will continue, this timeline of other crises endured since 1957 offers crucial perspective.??
Since 1957, the long term growth trend of stocks, as measured by the S&P 500, is shown in the dotted red line, was a 6.9% compounded annual growth rate on investments in the Standard & Poor's 500.
Ultimately, earnings drive stock prices. Courtesy of Ed Yardeni, a leading financial economist, between January 23, 2020, when the Covid-19 scare began, and release of the most recent earnings forecast from Wall Street analysts, on February 20, 2020, the expected earnings on the S&P 500 declined six-tenths of 1%. To be clear, expected earnings have only been shaved back.
Notably, profits expected on technology stocks surged by 3.4% after the outbreak hit. Why? Some say Netflix, Amazon and other tech stocks that support staying at home and away from the virus could see a boost in earnings.
The S&P 500 dropped more than 11% in the last five trading days, on fears of Covid-19's economic effects. From its all-time closing high of 3380.16, reached only two weeks ago, the S&P 500 closed a week that will be infamous in financial history, at 2954.22.
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