Bullish. Normally a decent performing market month, March is above average in election years with advances 64.7% of the time with a 1.0% average DJIA gain since 1952. S&P 500 has also advanced 64.7% of the time since 1952, but gains have been slightly better at 1.2%, on average. NASDAQ has not fared well in March in election years since 1972 mainly due to a steep decline in 1980.
Neutral. According to Investor’s Intelligence Advisors Sentiment survey Bullish advisors are at 49.1%. Correction advisors are at 31.7% and Bearish advisors are 19.2%. However, this survey was taken right before the bulk of the current retreat transpired. Bullish sentiment has most likely had a further and more sizeable retreat since then. Historically, high levels of bearish and correction advisors are observed at new broad buying windows.
Uncertain. The market appears to be driven purely by headlines now and uncertainty is growing. How big will the economic impact of the coronavirus be? Only time will tell. History suggests a short-term impact. Growth is likely to slow as supply chains and daily life are interrupted, but once the virus is contained and/or a viable vaccine is available economies are likely to return to normal. At which time any pent-up demand could result in a surge in growth.
Correction. As of February 27 S&P 500 has experienced 26 corrections (decline greater than 10%, but less than 20%) since 1948. The current correction was confirmed February 27 and is the quickest to reach the threshold from a new all-time high. DJIA, S&P 500 and NASDAQ have all plunged below their respective 50- and 200-day moving averages and are still in search of support. Fear appears to be the biggest driving force now as the decline has certainly removed many of the excesses that recently existed.
1.50-1.75%. The Fed did not meet in February and their next meeting is in mid-March. Safe-haven demand has caused bonds to surge and yields to plunge. The declines in yields and uncertainty overhanging global growth outlooks due to spreading coronavirus could push the Fed to cut rates. However, the impact of even lower rates could be muted as the key issue is not exactly a financial condition, it is a medical concern.