Monthly Market Insights | April 2020

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The spread of COVID-19 sent stocks tumbling, as the health and economic costs of the pandemic continue to mount.

U.S. MARKETS
The spread of COVID-19 sent stocks tumbling, as the health and economic costs of the pandemic continued to mount. The Dow Jones Industrial Average dropped 13.74 percent, while the Standard & Poor’s 500 Index fell 12.51 percent. The NASDAQ Composite lost 10.12 percent.1 When you reach the end of your rope, tie a knot in it and hang on. Franklin D. Roosevelt, 32nd President of the United States. Stocks moved sharply lower early in the month, as investors grappled with a string of troubling coronavirus headlines. Meanwhile, the markets kept an eye on the evolving coronavirus pandemic, while digesting both the Super Tuesday results and a drop in oil prices.

SWIFT ACTIONOn March 15, the Federal Reserve cut interest rates to zero and announced several actions designed to support households and businesses. However, markets were unfazed by the Fed’s aggressive move, electing to instead focus on the contraction of economic growth that many are expecting. As prices fell, the hospitality, real estate, and travel industries felt the immediate impact of the newly instituted social distancing rules. At the same time, financial stocks suffered losses on lower interest rates, while energy prices sunk to new lows in part due to lower oil prices.

THE CARES ACT.
As the month came to a close, the passage of the $2 trillion CARES Act led to a historic jump in stocks and provided some much-needed support to the market. Stocks registered their best weekly performance since 1933, with the S&P 500 surging over 10 percent.2 However, stocks were mixed in the final days of trading, leaving the markets with losses for the month.

SECTOR SCORECARD
All industry sectors ended lower in March, with declines in Communication Services (-12.69 percent), Consumer Discretionary (-13.58 percent), Consumer Staples (-4.12 percent), Energy (-36.78 percent), Financials (-19.48 percent), Health Care (-3.93 percent), Industrials (-18.24 percent), Materials (-13.37 percent), Real Estate (-12.97 percent), Technology (-7.32 percent), and Utilities (-7.14 percent).3

RATTLED BY THE MARKET DROP? YOU’RE NOT ALONE

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We have witnessed some extraordinary moves in the financial markets during the past few trading sessions.

In recent days, the Standard & Poor’s 500 index has fallen by over 7 percent more than once. Ongoing concerns over the possible economic slowdown stemming from the coronavirus are prompting traders to reprice financial assets.1 For many, things “got real” when the National Basketball Association suspended its season, and actor Tom Hanks and Rita Wilson both tested positive for COVID-19.

In times like these, I hear from some clients that they can find it difficult to stay committed to an investment program when fears are high.

But for me, a quick look at recent history helps me keep tumultuous seasons in perspective.

Remember when the trade dispute with China ramped up back in February 2018? In just six trading days, stock prices had undergone a rollercoaster ride on their way to a 10-percent market correction. On February 8, 2018, CNBC reported that the Dow Industrials traveled 22,000-plus points over the course of February’s first full week of trading, due to trade-related fears.2

How about the 4th quarter of 2018? On October 10 of that year, the Dow saw an 800-point drop, largely due to rising interest rates and global economic concerns. And who can forget the holiday market trading two months later? It was a breathtaking event as the Dow lost over 600 points on Christmas Eve, then soared 1,000 points the day after Christmas.3,4

In the past few weeks, I’ll admit that I’ve done a few “double takes” at my computer screen, as we’ve watched major swings in stock prices and movements in the bond and crude oil markets.

But just like always, I am here to help you and your family answer any questions that might surface for you. Whatever decisions you’re considering, I’d be honored to support you through them. Reach out to me anytime.

All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

1. CNBC.com, March 12, 2020
2. CNBC.com, February 8, 2018
3. CNBC.com, October 10, 2018
4. CNBC.com, December 25, 2018