Todd’s Take on the Market
The good news, March is over. The bad news, nothing has changed.
Markets turned sharply negative in the first quarter of the year as the COVID-19 pandemic and social distancing brought certain areas in the global economy to a screeching halt. U.S. equities dropped by the most in a quarter since 2008, with small cap being the worst performer at -30.6%.
The Dow was off 25% for the quarter, the S&P 500 was down 22% and the NASDAQ only off 17%.
The quarter-end window dressing rally that began on March 23rd, and took the S&P 500 up nearly 20% off the lows, ended Tuesday as the final bell rang. This closed the doors on the first quarter of 2020 that saw the worst performance since 1987.
Now this is a complete contrast to the first five weeks of the year when all of the indexes were making new highs in what seemed like an almost daily occurrence. It couldn’t get any better. The rally of 2019 that saw the markets advance better than 30%, kept on going into the new year as the economy was firing on all cylinders leaving even some street analysts at a loss to explain.
But all that is history – like George Washington and Abraham Lincoln. No one knows what is next for the market, the trend is lower, despite today’s 1000-point rally.
Now, investors might be entering the “acceptance” phase of the crisis. People know this is going to go on a while and accept what doctors say about how things could get a little worse, but they seem to feel reassured by the FED and Congress taking quick action to give the economy a security blanket.
It’s a positive that people aren’t clinging to every piece of bad news. Also, investors might be cheering the fact that all levels of government seem to be getting on the same page—which arguably could be key to defeating this. It was hard for investors to hear different messaging from different authorities about time framing.
Let’s look at some of the data we got last week.
We’re gonna need a bigger boat!
Jobless claims—6.6 million—I’ve been watching economic numbers for 20 years, and this is beyond, beyond—10 million in two weeks—staggering and heart breaking at the same time. For perspective, 6.6 million claims are 30x a normal week over the last 10 years. It’s the unemployed workers not filing claims and missing out on $600/week checks that are worrisome, and we don’t know how many of them there are.
My son, who works for Crown Castle the wireless infrastructure company, said that employees won’t return until late May for Dallas and Virginia. He doesn’t know when he will go back to the office, but many others aren’t so lucky. Their jobs are gone—G.O.N.E.
As one respected manager said, this was an earthquake and we will not go up in a straight line, there will be tremors.
Years from now, we will look back on all this as ultimately representing a great long-term buying opportunity, but getting through it day by day and week by week is an entirely different and much, much more uncertain matter.
Please stay tuned and we are committed to keeping you posted. As always, please reach out to us if you have questions, comments or concerns.
Todd Day, MBA
Portfolio Manager
Horizon Financial Services, LLC
