March, the worst month for US equities since the financial crisis, also had the best three-day stretch since the 1930s. Today we face unprecedented economic challenges and market volatility. As investors in the middle of a tempest, one thing we can manage is time. As the CoW shows, time in the market can be especially important as the good days may continue to cluster near the bad.
Markets struggled to find direction last week as trading seesawed amid a policy void. As global fiscal and monetary policy transition from announcement to implementation, markets advanced on talks of a next round of stimulus and on signs of an oil deal, and declined on the implications of extended physical distancing. The S&P 500 ended down -2.02% while the FTSE 100 and Euro STOXX 600 fell -2.02% and -0.49%, respectively. Read More
Oil prices surged as prospects of an OPEC+ deal brightened the same week as the original production cuts expired. At the behest of President Trump, Saudi Arabia called an urgent meeting of the OPEC+ alliance to discuss a “fair agreement” to end the price war with Russia and strike a deal that would likely depend on US involvement. After hovering around well-head costs ($20/bbl), Brent crude and WTI prices rallied 36.82% and 31.75%, respectively. Read More
Global government yields continued to follow COVID-19 developments, related policy impacts, and oil price war progress. US Treasury yields rebounded late in the week as the market shrugged off record high US weekly jobless claims and was buoyed by hopes for a Saudi-Russia truce. Still, the 10-Year and 2-Year Treasury ended -15bps and -5bps lower, respectively. Meanwhile, German Bund yields rose and the spread between the 10-Year Treasury and Bund yields narrowed to 100bps midweek, the tightest point in six years. Read More
The US dollar re-strengthened against peers on the back of higher oil prices and investors moving towards safe-haven assets. The US Dollar Index jumped 1.78%. Meanwhile, delayed policy decisions in the euro zone have weakened the euro, which fell -2.77% against the dollar. Read More
Economic fallout from COVID-19 was evident in March labor data. US initial jobless claims set another record, rising to 6.6 million. The unemployment rate rose to 4.4% from a record low of 3.5% in February, and nonfarm payrolls decreased (by -701k) for the first time in nearly a decade. Notably, the survey period ended on March 12, before much of the US began near-shutdown. In France, 4 million workers have been laid off in the past two weeks while Spain recorded its highest increase in unemployment (+800k) in March. In the UK, almost 1 million people have applied for universal credit. Read More
US ISM data declined in March, but fared much better than economists forecasted as the data just begins to pick up the activity slowdown. ISM manufacturing fell into contractionary territory at 49.1 while the services sector slowed but held expansionary territory at 52.5, higher than the expected level of 45. However, steep declines in new orders and employment indicated further room to fall. In China, March Caixin manufacturing PMI index improved to 50.1, but saw new orders, export orders, and employment still in contraction. Meanwhile China services remained in contraction at 43. 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.
German IP MoM (Cons: -0.9%, Prior: 3.0%)
US Jobless Claims (Cons: 5000k, Prior: 6648k)
UMich Cons. Sent. (Cons: 75.0, Prior: 89.1)
UK IP MoM (Cons: 0.1%, Prior: -0.1%)
US Core CPI (Cons: 2.3%, Prior: 2.4%)
“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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