Corona Virus Update. Recession 2020?

Disney Executive Chairman Bob Iger handed over the CEO reins to Bob Chapek on February 25, 2020. Photo: Bob Iger at the World of Color Premiere Disney California Adventure by Josh Hallett. Wiki Commons. Used with permission.

Apple reported on February 17, 2020 that they would miss their revenue targets. On Jan. 28, 2020, the company had given themselves a $4 billion window to be right in, of $63-$67 billion.

Microsoft signaled an earnings miss on their More Personal Computing segment on Feb. 27, 2020.

Corona Virus Update. Recession 2020?
Free Teleconference Next Thursday, March 5, 2020 at 9 am PT/noon ET. Get call-in details at the end of this blog.
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Here is the Corona Virus scorecard so far. Apple and Microsoft have warned that they will miss their earnings guidance. Disney CEO Bob Iger abruptly gave his job to someone else on February 25, 2020. (This is a red flag. Iger wants to cement his stellar reputation of increasing Disney’s market capitalization five-fold, with the acquisitions of Pixar, Marvel, LucasFilm and Twenty-First Century Fox.) The Dow has dropped over 3000 points since the high set on Feb. 12, 2020 (as of the market open on February 27, 2020). The global market has lost over $4 trillion.

Why is the Corona Virus causing such a stir? Will the markets recover, or is this the beginning of a recession in 2020? 

Let's discuss the facts and data, and a time-proven, recession-proof, strategy you can easily employ now.
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Update
Our hearts and prayers are with anyone who is struggling with this virus, those who have lost loved ones and anyone who is quarantined or furloughed from work. The very personal, human cost is always the greatest. Below is an update on the economic cost of the virus.  

1. Industries, Companies and Countries Most Impacted. China is the factory to the world. Countries around the world are impacted by this virus, either from supply chain disruptions, or from having so many businesses closed in China. Please consult my CoronaVirus blog from February 14, 2020 for additional information. The industries with very high exposure to Chinese supply chain or retail include technology, fashion, casinos, airlines, auto manufacturers and more.
2. 1Q 2020 GDP Growth. Expectations in 2020 were for a global economic slowdown – before news of the CoronaVirus hit. S&P Global expects China’s economy to slow to 5% growth in 2020, if the virus is contained by March. Prior projections were for the U.S. economy to grow by 2.0% in 2020. Revisions have not yet been announced for U.S. growth. However, the U.S. is flying closer to the trees of a recession than China is. Remember that it takes two quarters of consecutive negative growth to equate to a recession. So, you won't hear about a recession until we are already seven months into it. 
3. 1Q 2020 Revenue Projection Revisions. As I mentioned, American companies, like Apple and Microsoft, have warned that they will miss their revenue guidance. Bob Iger, Disney’s CEO, transitioned out of the top management job on February 25, 2020, opting to serve the rest of his tenure through Dec. 31, 2021 as the executive chairman. Expect more announcements in the days and weeks to come, particularly in the industries, companies and countries with the most exposure to China.  

Beware of Bad Advice
 

1. Don’t Buy the Bounce. There’s a saying on Wall Street, “Don’t try to catch a falling knife.” Market timing never works. Panic isn’t a strategy either. Now is the time for another Wall Street aphorism, “Stick to your knitting.” If your financial plan is sound, then stick to it. If you don’t have a financial strategy yet, your first investment should be to learn a time-proven strategy. If your plan lost a lot in the Great Recession, that is your signal that your financial plan is not sound.
2. Buy & Hope is a last century strategy that doesn’t work in this century. Last’s century’s financial strategy, Buy & Hope, doesn’t work in the 21st Century. Most investors have lost more than half in each of the last two recessions. There is a time-proven 21st Century strategy that does work. However, if the brokerage where your money is housed is still using Buy & Hope strategies, then your plan is likely very vulnerable to the next correction. It’s time to stop riding the Wall Street rollercoaster, and start using the easy-as-a-pie-chart nest egg strategies that earned gains in the last two recessions and have outperformed the bull markets in between. Call 310-430-2397 or email info @ NataliePace.com to receive links to our free Web Apps for a personalized investing pie chart.
3. Beware of Dollar Cost Averaging Advice. A TV personality went on air to say she was thrilled that the markets were falling because you can now buy stocks at a lower price. It’s no fun to lose half of your wealth so that you can buy at a lower price. That just doesn’t make any sense. Dollar cost averaging is a Buy & Hope tool – one that serves old-school brokerages well, but not investors. A better strategy is annual rebalancing, which is a buy low, sell high plan on auto-pilot for your nest egg. If you’d like to protect your nest egg now, while the markets are still very high, join me at my next Investor Educational Retreat in England or Santa Monica, or receive an unbiased 2nd opinion on your current plan vs. a better plan. Call 310-430-2397 to learn more now.
4. Undervalued, Dividend Growth Stocks. When the markets are at an all-time high, and financial leverage is astronomical, there really are no undervalued dividend growth stocks. Be very careful about all of the noise that is circulating. It is misleading and could be very expensive.

 

What Does Work

1. Proper Diversification. You should always: 1) keep enough safe, 2) overweight safe in troubled times (now), 3) have small, mid, large, value and growth funds, and, 4) invest in hot industries, particularly ones that might increase in value during a market correction.
2. Annual Rebalancing. As I mentioned, annual rebalancing is a Buy Low, Sell High plan on auto-pilot. When you are using our nest egg pie chart system, then you are taking the emotions out of investing, which will serve you well.
3. Adding in Hot Industries. There are industries that can go up if the markets go down. There are products that are increasing in sales at an astonishing pace. There are certain companies that weather storms better than others. Having exposure in these areas will help you to avoid losses, and could participate in having a net positive return, even in a down year.
4. Avoiding Leverage. Over 50% of corporate bonds are at the lowest rung, just above junk status. If any of these companies have exposure to China, they are at risk of a downgrade. Investors do not receive advance notice. General Electric and Ford aren’t the only companies that were at risk before their announcements. In general, the higher the dividend, the higher the risk. So, you need to examine your value funds, where dividend stocks are usually congregated, with a forensic eye.
5. Know What’s Safe in a Debt World. Bonds, annuities and money market funds are very vulnerable to capital loss in 2020. Bonds lost money in 2018, almost in tandem with the stock market losses. These are areas where most Main Street investors get safe. So, it’s time to get informed and make solid, fact-based choices for your money. (What’s safe can change every year…) Read my Bank Bail-in on Your Dime blog for additional information.
6. Know what you own and why. Get a 2nd opinion now. Learn the ABCs of Money that we all should have received in high school (by attending a retreat and reading my books). Don’t have blind faith in your broker/salesman to do this for you. If you lost more than a third in the Great Recession, and you haven’t made any changes, you’re as vulnerable today as you were then. W​isdom is the cure.

 
Get your questions answered live in our free teleconference next Thursday, March 5, 2020, at 9 am PT/noon ET. Call:  (347) 215-7305
 
Listen back 24/7 on demand at https://www.BlogTalkRadio.com/NataliePace.
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Important Disclaimers
Please note: Natalie Pace does not act or operate like a broker. She reports on financial news, and is one of the most trusted sources of financial literacy, education and forensic analysis in the world. Natalie Pace educates and informs individual investors to give investors a competitive edge in their personal decision-making. Any publicly traded companies or funds mentioned by Natalie Pace are not intended to be buy or sell recommendations.

ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies. Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect a diversified strategy, which has been designed with the assistance of a financial professional who is familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge and patience.  

Information has been obtained from sources believed to be reliable however NataliePace.com does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this publication and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.