Did the market retreat because of the coronavirus or had it simply gone too far, too fast? At the market’s high on January 17 the S&P 500 Index was a whopping 335 points above its 200-day moving average. That’s the highest reading since January 26, 2018, after which the market fell 10 percent.

By Friday’s close, we’ll know if the market had a positive January. If so, that’s a good sign. Using work from Jay Kaeppel (A Useful Alternative to the Standard 60/40 Approach), if the Dow was higher in November, December, and January then that would be a bullish signal for the rest of the year. Beginning in 1935, if the Dow closed higher in each of those three months the market rose the next 12 months 79 percent of the time with an average Dow gain of 10.2 percent. If it didn’t close higher in each of those months, the average increase was 6.1 percent.

Of course, there is the market and there are stocks. I have liked and continue to like healthcare stocks. While the coronavirus is bad for most industries (especially travel, leisure, and gaming), healthcare stocks will benefit. 

Healthcare was once a growth sector, but now the stocks are in the value camp due to their yields, dividend growth and business models that are not dependent on the economic cycle. Two that I like are Merck (MRK) and Pfizer (PFE), which is well off last year's low of $33. By mid-year, Pfizer will spin-off Upjohn, which will then merge with Mylan to form a company to be called Viatris. Stockholders will receive 12 shares of Viatris for each 100 Pfizer. Pfizer's joint venture with Glaxo will market its many consumer products (Advil, Chapstick, Tums, etc.). Pfizer will soon be a focused drug and biotech company whose stock will merit a higher multiple more in line with competitors (like Merck). Investors are beginning to recognize and appreciate that.

Becton Dickinson (BDX) is also attractive. They make a lot of the products used in hospitals, such as breathing masks. No doubt demand for those is increasing! Becton Dickinson rose to a record high even as the market was falling.

It is uncertain how long the coronavirus volatility will last, but the market is less extended now than it was two weeks ago. This is a better entry point, and healthcare stocks are especially attractive.