During times of heightened market volatility and stressed liquidity, many investors feel a strong urge to de-risk and sell out of their equity positions. While timing the market has been notoriously difficult, history has rewarded patient investors who stayed invested over a longer time horizon. As the Chart of the Week shows, what matters most is time in the markets, not timing the markets.
Despite global central banks' emergency rate cuts and accommodative actions to counteract the economic impact of COVID-19, equity markets remained volatile and choppy. The European Central Bank made a “no limits” commitment while the Bank of England (BoE) announced a bond buying program. The VIX, a fear gauge, hit a record high of 82.69 last Monday. The S&P 500 continued its selloff from the prior week and ended 15.0% lower. The Euro Stoxx 600 and FTSE 100 also ended lower by 2.0% and 3.2%, respectively. Read More
Crude remained volatile amid demand shocks from the pandemic and persistent supply-side shocks from the Saudi-Russian oil-price war. WTI dropped 24% midweek to $20.05 per barrel (bbl), an 18-year low, before rebounding to $22.43 per bbl after President Trump hinted at potential intervention in the price war. Brent fell 20.3% for the week at $26.98 per bbl. Read More
Global sovereign debt yields rose as governments increased spending to respond to and curtail the spread of COVID-19. US 10-Year Treasury yields ended at 0.92 hitting a three-week high of 1.226% amid talks of a $1 trillion government spending plan. In Europe, accommodative central bank policy changes drove 10-Year German Bund and UK Gilt yields up 22 basis points (bps) and 15 bps, respectively. Read More
Demand for the US dollar surged on the back of pandemic fears, sending the greenback up 3.88% last week against its peers, as investors and companies rushed to secure liquidity. The British pound fell to a 35-year low midweek, stabilizing slightly to end the week at $1.1569 after the BoE’s emergency rate cut. Meanwhile plans by the Bank of Japan to double its ETF purchases failed to support the Japanese yen, which saw the USD/JPY pair closing up at $111.18. Read More
In an effort to mitigate the economic fallout from COVID-19, the Fed announced a 100 bps emergency rate cut to 0.0% - 0.25% and quantitative easing program ($700 bn+) this past Sunday. Meanwhile the BoE unanimously decided to reduce its Bank Rate by 15 bps to 0.10%, its effective lower bound, and announced an increase of asset purchases by GBP 200 billion, after an unscheduled meeting. Read More
The Philly Fed Manufacturing Index plunged to -12.7 (-49.4pt) in March, its lowest since July 2012 and well below expectations, as economic weakness from COVID-19 started to be reflected. Read More
US jobless claims climbed to its highest level in over two years at 281k (+70k) for the week ending March 14, driven by COVID-19 related layoffs in the services sector. Meanwhile, January’s UK unemployment rate rose to 3.9%, above consensus estimates, edging up from the historic low level of 3.8% in December. Read More
February’s Japanese national new core Consumer Price Index (CPI), which excludes fresh food and energy, disappointed at +0.6% YoY, down from January’s +0.8%. We note that the full impact of COVID-19 is unlikely to be reflected until the next reading in March. Read More
For style performance, Large, Mid, and Small refer to the Russell 1000, Russell Midcap, and Russell 2000 indices, respectively. Value refers to companies with lower price-to-book ratios and lower expected growth values, and Growth refers to higher price-to-book ratios and higher forecasted growth values. Government, Corporate, and High Yield refer to the US Treasury index, the US Corporate Credit index, and the US High Yield index, respectively. Short, Intermediate, and Long refer to the Short, Intermediate, and Long segments of their respective curves. Quality returns refers to the credit quality of asset classes ranging from Government, highest quality, to High Yield, lowest quality.
US Manuf. PMI (Cons: 44.0, Prior: 50.7)
US Services PMI (Cons: 32.0, Prior: 49.4)
Germany Ifo Business (Cons: -- Prior: 87.7)
UK CPI YoY (Cons: 1.7%, Prior: 1.8%)
US Jobless Claims (Cons: 1500k, Prior: 281k)
Eurozone M3 Supply (Cons: 5.2%, Prior: 5.2%)
US Core PCE (Cons: 1.7%, Prior: 1.6%)
“Euro PMI” refers to the Markit Eurozone Composite Purchasing Managers’ Index. “Cons. Conf.” refers to US Consumer Confidence. “GE IFO Business” refers to the German Ifo Business Climate Survey. “New Home Sales” refers to US New Home Sales (MoM). “Dur. Gd. Ord.” refers to US Durable Goods Orders. “UK GDP” refers to the QoQ estimate of the United Kingdom’s Gross Domestic Product for Q3. “Euro M3” refers to the YoY change in the Eurozone’s M3 Money Stock. “US GDP” refers to the estimate of US Gross Domestic Product for Q3. “Pers. Cons.” refers to US Personal Consumption. “UMich Cons. Sent.” refers to the University of Michigan Consumer Sentiment Index. “Japan Core-Core CPI” refers to Japan’s Consumer Price Index (ex- Food, Energy YoY).
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