Stocks Down in January and February Have Bulls Worried

The hits keep coming, as the Federal Reserve (Fed) did an intra-meeting cut yesterday, causing stocks to sell off hard on concerns the economy is on more fragile footing than most think. Read First Emergency Rate Cut By the Fed Since 2008 for our immediate thoughts on the Fed and the rate cut.

The other big worry is the potential impacts of COVID-19 (aka, the coronavirus) on the global economy. We’ve discussed our views on this many times recently, so today we will take a look at another potential warning sign.

The S&P 500 Index fell in January and February. This rare combo isn’t something the bulls wanted to see, as future returns can be quite depressing. “History tells us that bad things can happen after the first two months of the year are both red,” explained LPL Financial Senior Market Strategist Ryan Detrick. “This is only one warning sign, but it isn’t one to blindly ignore either.”

As shown in the LPL Chart of the Day, a bounce in March is quite possible for stocks after being down the first two months of the year; that’s the good news. The bad news? The final 10 months have been up only 2.3% on average, while the full year has been lower 4.9% on average. Compare that to when the first two months have been positive, the final 10 months have been up 12.2% on average and the full year has been up 19.8% on average.

For more of our investment insights and thoughts on the coronavirus, check out our latest LPL Market Signals podcast Coronvirus: What We Know, and What We’re Watching.


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