General Market Commentary as of March 31, 2020
Q1 of 2020 saw the 11-year bull market run come to an abrupt end. The World Health Organization (WHO) declared COVID-19 a pandemic and by then fear had already spread throughout the market as sectors suffered across the board. The S&P 500 posted a 20% loss for the quarter, the biggest quarterly decline since 2008. The Dow lost 23% for the quarter, the biggest drop since 1987. The Nasdaq suffered a 14% drop. Energy companies took some of the biggest blows. Severe reduction in air travel and motorists staying off the road has decimated fuel demand, coupled with price wars overseas and oil prices ended the quarter with their biggest losses on record, losing two-thirds of their value. Volatility reached an all-time high and reminiscent of figures during the financial crisis.
The Federal Reserve stepped in multiple times to help stabilize the market by rolling out new programs at all hours of the day to stop the bleeding of this health crisis. First, the Fed established a liquidity backstop to support the flow of credit to households and businesses. The next day, they broadened their program of support for flow of credit by establishing a Money Market Mutual Fund Liquidity Facility. One day later, they announced the establishment of temporary U.S. dollar liquidity arrangements with other central banks across the world. These actions helped thwart the uneasiness over the supply of U.S. dollars or a potential run on cash. The announcement of two emergency rate cuts last month was something that hasn’t been done since the financial crisis.
To end the quarter, a record 3.3 million Americans filed for unemployment benefits, nearly five times the previous record. Unemployment will undoubtedly grow as numbers update and increased mitigation efforts have caused entire businesses to shut down. The coronavirus stimulus bill was the largest economic-relief package in U.S. history. More funding and relief payments are expected to follow as the government has not been shy in attempting to weather the storm. We can also expect that our healthcare system will ramp up and respond to this problem better than anywhere else. While the data can be confusing and sometimes troubling to digest at times, there have been encouraging signs from the medical community that provide hope to those who need it most. We find ourselves in a time when self-quarantine, social distancing, and flattening the curve is the new normal. The virus has put strains on everyone to one degree or another, but eventually this too shall pass.
|Tot Return||3-MO*||12-MO*||3-Year*||5-Year*||Closing Value|
|Dow Jones Industrial Average||-23.20%||-15.47%||1.98%||4.28%||21,917.16|
Source: Morningstar. The S&P 500, Dow Jones Industrial Average, and NASDAQ Composite are unmanaged indexes. It is not possible to invest in an index. Past performance is no guarantee of future results. * Price only. Does not include dividends.
All overviews and commentary are intended to be general in nature and for current interest, educational purposes and factual reference only and are subject to change based on market and other conditions.