Playbook Combats Fear l LPL Market Signals Podcast

March 16, 2020

Last week was one of the most volatile weeks for stocks globally, followed by strong Federal Reserve action. LPL Research strategists review the economic impacts and 5 key clues in their investing playbook.

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Stocks continue to sink globally as the potential economic impact of COVID-19 (coronavirus) spreads. With various countries shutting down and stock markets crashing, a truly historic event is taking place. This week the LPL strategists discuss the latest news on the virus, what the Federal Reserve (Fed) just did, and our playbook for these trying times.

Latest coronavirus update

After one of the most volatile weeks stocks have ever experienced, last week’s global rout continued on Monday. The number of COVID-19 cases continues to increase, without a near-term end in sight in the United States. To help combat the likelihood of a major economic slowdown, the Fed cut interest rates 1% down to 0%. Various other central banks around the world have made similar moves as well. As the LPL strategists discuss, this move won’t stop the spread of the virus, but it could help to ensure short-term funding needs are met and stave off a major financial crisis.

What's the same and what's different?

Things have changed over the past week, as the odds of a recession have risen substantially while more and more employees are working from home, and kids are ordered to stay home. As the LPL strategists note, however, market weakness and volatility have been the same the past few weeks—along with the continued possibility for a strong recovery once this temporary setback ends. Lastly, and maybe most importantly, the need to follow one’s investing playbook is the same.

LPL Research's current playbook

In 2008–09, LPL Research followed an investing playbook that was very helpful during the bear market, and our playbook for this crisis has some similarities to the 2008–09 version. We are watching for five things now that could give us clues as to how long this crisis could last and how much further stocks may have to fall:

Are new COVID-19 cases at or near a peak?
Is recession priced into stock prices?
Does the economic data reflect recessionary conditions?
Are markets washed out from technical-analysis and sentiment perspectives?
Has policy support been sufficient to get us out of this?

Look for our perspectives on these questions and more playbook details in the coming days.

Tune in now

Listen to the entire podcast to get the LPL strategists’ views and insights on current market trends in the US and global economies. To listen to previous podcasts go to Market Signals podcast. You can subscribe to Market Signals on iTunes, Google Play, or Spotify.

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IMPORTANT DISCLOSURES

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth in the podcast may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. All indexes are unmanaged and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This Research material was prepared by LPL Financial, LLC.

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