Condor Capital Management

Explore: What the Coronavirus Means for Markets

What the Coronavirus Means for Markets

Updated February 24, 2020
Originally Posted on February 10, 2020

The current Novel Coronavirus, with over 75,000 cases and 2,600 deaths, has grown into a major health issue with a greater scope than the SARS outbreak of 2002 & 2003.  Beyond the obviously tragic human toll, the virus’s spread has caused significant anxiety for financial markets as well. 

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Condor Capital Reviews 4th Quarter 2019

Financial markets finished the year near all-time highs, wrapping up a decade marked almost exclusively by bull markets.  The S&P 500 Index gained another 9.06% in the fourth quarter, resulting in an overall gain of 31.48% for the U.S. benchmark in 2019.  While it should be noted that this stellar year came off a low base thanks to a relatively large market downturn in December 2018, it still proved to be a year of strong economic growth and multiple expansion, with markets resilient against trade and political uncertainties.  As was often the case in 2019, growth stocks outperformed their value counterparts in the fourth quarter, though the gap between the two did narrow in the second half of the year.  Healthcare and technology stocks significantly outpaced many other sectors, while real estate and utilities lagged notably.  Small-caps finished the quarter as the top performers, followed by large-caps and then mid-caps.

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General Thoughts on Equity Market Volatility

General Thoughts on Equity Market Volatility

From time to time, we publish our thoughts on current market events to provide clients with insights into these events and how they relate to our investment outlook and their portfolio, but we thought this would be a good time to provide our thoughts on volatility in the equity market in general.  Over the years we have received questions on a wide range of topics, but at the end of the day the question most people are asking is – I think something bad is about to happen, should I sell my stocks?  The answer, if you are positioned properly heading into any market volatility, is no.

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Inversion of the Yield Curve

Inversion of the Yield Curve

Much noise has been made about the U.S. yield curve’s inversion with 3-month Treasury yields trading roughly around the same price as 10-year Treasuries.  Pundits have been quick to declare that a recession is imminent, citing similar situations where the yield curve has inverted before recessions in the last 60 years.  While it is true that the yield curve has inverted before past recessions, it must also be noted that there were moments of inversion that were not followed by a recession over the last 60 years as well.  There is also no accurate way of timing when a recession might occur even after a yield curve inversion.  The chart below highlights this:

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Comments on Market Volatility

I wanted to reach out to address the recent stock market volatility. For the past few months, it seems as if every news headline has been negative and while there are certainly causes for concern, there are some reasons for optimism. Before touching on this, I wanted to reiterate some of my comments from our last letter and discuss our approach to portfolio construction.

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Our Thoughts on the Recent Market Weakness

Our Thoughts on the Recent Market Weakness

I wanted to take a minute to address the most recent bout of volatility in the market.  Before addressing the causes for the recent downturn and providing our thoughts, it’s important to remind investors of the benefits of having a diversified portfolio.  Different areas of the market will outperform at different times and it can be tempting to wonder, why bother holding asset classes that are not performing as well as others at any given time?  The reason is that changes in the market happen quickly, much more quickly than changes in the economy and much more often.  In fact, since 1980 the average annual intra-year drop for the S&P 500 is 13.8%, yet the Index has rebounded to finish the year positive in 29 of the 38 years analyzed and averaged an annual gain of 8.8%.

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Rising Interest Rates & the Market

Interest

Today’s relatively sharp market sell-off is generating a lot of discussion around the impact of rising interest rates on financial markets. Although there are legitimate concerns that the Federal Reserve’s interest rate increases could reduce demand for relatively riskier asset classes like stocks and slow the economy more than expected, it is our view that these concerns are outweighed by other, more positive factors. Our outlook is rooted in the continuing underlying corporate and economic strength domestically, as well as a longer-term contextual view of why interest rates are rising in the first place.

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Turkey Contagion? Not So Fast…

Turkey Contagion? Not So Fast...

Front and center in the news lately is the concern over Turkey’s currency crisis, with the country’s lira falling against the dollar by as much as 20% in one day.  Last week’s downfall was led in part by President Trump’s doubling of tariffs on imported Turkish steel and aluminum along with continued heated rhetoric over an American pastor being held in the country.  Couple this with Turkey’s authoritarian president, Recep Tayyip Erdogan, and his brash tone toward international and domestic policies, and you can see the idiosyncratic factors that sent the lira tumbling.

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What to Make of the “Trade War”

Trade War

Last week, there was finally some evidence that the investment markets were starting to get jittery about the escalating tit-for-tat tariffs and threats of tariffs that some economists are calling “America vs. the World.”  Most investors are probably wondering whether new taxes on items flowing into and out of the U.S. really is something to worry about.

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What Will the Fed’s Balance Sheet Reduction Mean for Markets?

At its September meeting, the Federal Reserve announced that it would begin the process of winding down its balance sheet.  While the central bank is taking caution to chart a slow and gradual course, it marks a significant step in its plans to back away from quantitative easing and is likely to reverberate throughout financial markets as the unwinding progresses.

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