Todd’s Take on the Market
Despite global central banks emergency rate cuts and accommodative actions to counteract the economic impact of the coronavirus, it was a tough week for stocks as the Dow fell 17.29%, the S&P 500 fell 14.95% and the NASDAQ fell 12.62%. Since February 24th, the date of the first big virus-related selloff, the average daily move for the S&P 500, up or down, is a staggering 4.9%. Needless to say, this has been unprecedented.
And it wasn’t just stocks that remained volatile.
Bond yields in the U.S. and Europe rose to their highest levels in weeks as fund managers under pressure to return cash to investors were forced to dump their most liquid holdings—bonds. It was a fire selling as a lot of people need cash and they’re liquidating the only thing they can. And when bonds trade like stocks—oh boy! It wasn’t just corporate bonds under pressure either. Government bond prices around the world sagged along with stocks in a sign that even assets seen as “safe havens” were buckling under the pressure of the coronavirus pandemic.
Everything is dysfunctional when even the “safe stuff” is getting hit, but later in the week and thanks to the actions by the Federal Reserve, there seems to be some “normalcy” back in the bond market. This morning, we learned that the FED has gone “all in” to stabilize the markets by announcing what is basically Quantitative Easing to infinity.
Crude oil also remained volatile amid the demand shock from the pandemic and persistent supply-side shocks from the Russian-Saudi oil price war. West Texas Intermediate (WTI) dropped 24% midweek to $20.50 a barrel. So, buy the barrel and they will throw the oil in for free.
There is an old saying on Wall Street—they don’t ring a bell at the bottom, but right now, everyone is trying to nail the bottom of this “once in a lifetime” buying opportunity. First of all, it’s not a “once in a lifetime” opportunity. Second, picking the bottom isn’t the opportunity. The bull market that follows is the opportunity, and there’s plenty of time for that.
Please stay tuned and we will keep you posted on what is turning out to be a very fluid situation, not only with the financial markets, but in our daily lives.
Stay safe and healthy.
Todd Day, MBA
Portfolio Manager
Horizon Financial Services, LLC
