Stock market bears get a shot in the arm. A new virus strain is the bad-news catalyst sinking stocks worldwide. Yet, it comes as investor sentiment was quite bullish and positioning was extended. For the last two weeks, Horizon Investments’ Market Notes compiled the ways investors were putting themselves in a precarious position: PIIGS Fly and Other Stories of Investors Reaching for Risky Bets and Record High S&P 500 Ignites Unhealthy Retail Investor Interest. Add to that the record streak of bullish positioning in the weekly survey from the National Association of Active Investment Managers. Never before has it been above the 100 level for five weeks in a row!

Stay away. The news out of Europe is distressing; a new strain of the virus spreads more easily than before. That’s prompting governments in Western Europe and Canada to close their borders to British travelers during the holiday season. The S&P 500 opened about 1.2% lower than Friday’s close, essentially erasing last week’s gain. But greater pain is being felt in the trades that are more geared to global growth, including small-caps, value, and European equities.

What matters now? Based on cross-asset price action Monday — and the number of out-of-office replies flying around Wall Street email servers — we believe this is a correction in a market that has gone straight up since early November. Most importantly, it appears existing vaccine technology is effective against this new strain of the coronavirus. Those are the factors we are paying attention to, not the short-term hit to economic growth. And in case it was buried in the sea of red ink this morning, Congress agreed on a stimulus package worth about $900 billion, just the bridge the economy needs to get through what appears to be a difficult winter.

Speak up! With 4Q winding down, it’s time for Horizon Investments’ very short quarterly advisor survey. Here’s the link to let us know what challenges you face and how we can help.

Taking a holiday. Horizon’s Big Number and Market Notes will be on vacation this week and next, and will return in 2021. We wish you and yours a very happy holiday season!