A quick update on the current state of the markets and actions being taken.
Right now, we are somewhat in uncharted waters. Typically, market corrections based on events are short lived and the rebound occurs rather quickly. The coronavirus and the price war in oil occurring at the same time are the events that have created more uncertainty in the markets that may not be resolved in the short term. How long the virus will affect the economy is anybody’s guess right now and, depending on who you believe, it could be a few months before it subsides or we could be dealing with this till the end of the year.
It is an election year so the politicization of the virus is happening which means the media and politicians are playing on the public’s fears and biases. Reminder to double check all “facts” and try to determine if what you are reading or hearing is news or is it opinion.
Because of the economic impact of the virus in China, along with the global slowdown in travel and tourism, the demand for oil had begun to decrease this year. So, OPEC decided to cut production and asked Russia to do the same and when Russia said “no thank you” and decided not to cut production, Saudi Arabia slashed its oil prices and sparked a price war. These two countries are the largest exporters of oil in the world and their economic and governmental systems are based on selling oil, so somethings got to give. Of course, the US is affected by the price war, but because, as of 2019, it is now the largest producer of oil in the world, the US is not at the mercy of OPEC as it once was in the last century. On the plus side, the national average gas price is $2.32 and Texas average price is below that at $2.01. The Costco in Rockwall is selling gas for $1.77 according to Gasbuddy.com.
As a result of all the uncertainty, I have been making adjustments to portfolios as warranted while trying to balance short-term concerns with intermediate and long-term probabilities. Any snapback rallies may also create conditions for portfolio adjustments as well. I am also keeping track of any promising sectors and individual equities that are heavily oversold at the moment that will be bargains when the markets find a bottom.
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