3/17/20 Market Notes
On Sunday Central Banks around the world took their first coordinated action to lessen the impact of COVID-19, leading the U.S. Federal Reserve to lower its key overnight lending rate, the Fed Funds rate, to zero. While this was a necessary move, it took market participants by surprise and heightened fears of a global recession. Consequently, stocks took a walloping on Monday, as the Dow Jones Industrial Average fell a staggering 3,000 points, putting the index roughly 32% below its all-time high, set just over a month ago. The S&P 500 and NASDAQ each declined about 12%, while the benchmark Ten Year Treasury Yield hovered around 0.75%. Oil prices fell by 10%, bringing WTI oil prices below $29 per barrel, while gold prices fell below $1,500 per ounce as investors bet that inflation is a thing of the past (at least for now). On a sector basis, the Consumer Staples sector held up best, declining by 7%, while 9 of the 11 sectors of the S&P fell by more than 10%, led to the down side by the Real Estate sector, which declined 16.55% As more and more communities practice ‘social distancing’ and self-quarantining, the economic impact of COVID-19 will become more apparent and visible. In many cases, the lost demand will prove to be pent-up demand, as it has in other times of crisis. None-the-less, there will be a real economic cost as well. From an investment perspective, we continue to urge everyone to remain calm and not to overreact emotionally. Moreover, we continue to take steps to tactically and strategically reduce risk in the portfolios. We are doing so by reducing certain position sizes, and eliminating those that we believe are likely to be most susceptible to a longer-term economic impact related to COVID-19.
Disclosures: This market commentary is written by the 1879 Advisors and represents the views of 1879 Advisors. This commentary is not investment advice and should not be used as a basis to make investment decisions. Please consult with your registered investment advisor before making any investment decisions.