Monthly Market Recap: April 1, 2020

March Market Recap

April 1, 2020

Books will be written about what happened in America and in financial markets during March 2020.

Last month was historic for many reasons: The official declaration of COVID-19 as a global pandemic, government-mandated closures of schools and businesses, full-scale cancellation of public events, the degree of volatility in equity and bond markets, oil prices falling below $20 per barrel, massive central bank stimulus, and a $2.2 trillion federal rescue package, to name a few.

These are extraordinary times. Our country is facing a public health crisis that has led to an unprecedented economic shutdown. As you would expect, those are conditions that led to an exceptional amount of downward pressure on markets.

For the second consecutive month, all 11 sectors in the S&P 500 were negative. Eight of those suffered losses of 10% or more. Health Care (-3.8%) and Consumer Staples (-5.4%) weathered the storm best. Financials (-21.3%) and Energy (-34.8%) continue to be mired in a downward spiral. The Energy sector has lost more than 50% total in the last three months.

Index March 2020 YTD 2020
Dow -13.74% -23.20%
S&P 500 -12.51% -20.00%
NASDAQ -10.12% -14.18%

The numbers above make it obvious how much damage has been inflicted upon Corporate America and family retirement savings. It’s worth sharing that the final six trading days of March were mostly positive for stocks. While the S&P 500 finished the first quarter 24% below all-time highs, the index has bounced 18% off its March 23 low.

This publication, as its name implies, is traditionally a recap, but in this particular instance, most of our readers probably don’t want or need a line-by-line synopsis of what amounts to a financial injury report. Looking ahead, rather than back, seems a more worthwhile exercise.

It’s important that you know in times of market distress, the members of our Marks Group team are people and resources you can rely on. Our advisors and administrative staff are working harder than ever, whether in our office or from their homes. Our investment committee and portfolio managers continue to actively manage our model portfolios and make tactical adjustments where appropriate.

Much of the near-term future remains uncertain, so I’ll focus the remainder of this letter on what I do know.

1 Current predictions are unreliable

The information superhighway of 2020 makes it easier than ever to read an opinion (or publish your own) about what is next for the stock market and the US economy. The rapid decline of stock prices, which fell 34% peak-to-trough from February 19 thru March 23, seems to have encouraged some especially polarized predictions.

Most agree (Marks Group included) that a US and global recession is near certain. From there, predictions on the severity and length of the economic slowdown vary wildly. Extreme views make for good headlines, but realistically the outcome will be somewhere in the middle. I’d caution investors from having too much conviction one way or the other.

2 We’re still in the early stages of this new reality

Historic volatility has accelerated the pace of this selloff in stocks. Price movements that typically take months have occurred in a matter of weeks or days. On March 24, the Dow spiked 11.4% in a single day. Historically speaking, that’s a good YEAR! From Tuesday through Thursday last week, the S&P 500 rose 20% in three days.

Swings that large make it tempting to conclude we are further along in this new market reality than we really are. Bear markets don’t come and go in six weeks. The coronavirus pandemic that triggered this selloff will, according to the experts, continue to worsen in the coming weeks. The answer to whether March 23 ultimately proves to be the bear market bottom may well depend upon when the virus peaks. Even after we return to our normal lives, questions will linger about a potential relapse and whether consumer spending picks up where it left off.

3 The Fed is all-in

Say what you will about the longer-term risks of adding trillions more to the federal deficit. That’s a legitimate challenge for another year and another administration. As it pertains to the current crisis, the cornucopia of monetary stimulus announced by the Fed in recent weeks is already bigger than previous measures from 2008. Our country’s central bank will do “whatever it takes” to support our economy and our financial markets.

Liquidity injections have already added some measure of calm and helped avoid potential market malfunctions. Historically low interest rates, massive lending, and widescale asset purchasing won’t eradicate the coronavirus, but those policies will help corporations and consumers regain their financial health more quickly once the recovery begins.

4 Investors will have added flexibility this year

The $2.2 trillion fiscal stimulus package passed by Congress last week is meant to act as a life raft to corporations, small businesses, and consumers struggling to survive this widescale economic slowdown. Several aspects of the CARES Act are meant to give investors more flexibility with their money.

Here are some of the highlights:

Direct payments up to $1,200 per individual or $2,400 per married couple, plus an additional $500 per child, courtesy of Uncle Sam. Those payments will decrease for annual incomes over $75k (individuals) or $150k (married).

Enhanced unemployment benefits that will provide more money (up to an additional $600 per week) for a longer period (up to four months) to more people (expanded eligibility) affected by the fallout from COVID-19.

Tax filing deadline for 2019 has been extended to July 15. This applies to federal income tax returns, although most states (including Minnesota) have extended state income tax filing deadlines as well. If you have already filed your return and owe a balance, you have three extra months to settle up.

Required Minimum Distributions from IRA’s have been suspended. For those individuals age 70 ½ or older, you will no longer be required to withdraw money out of your IRA’s or other qualified retirement plans in calendar year 2020. This also applies to those individuals turning age 72 in 2020 who would otherwise have begun taking RMD’s this year.

Elimination of the 10% penalty on IRA withdrawals taken prior to age 59 ½ for “affected persons” meaning health or financial hardship brought on by COVID-19. This applies to distributions up to $100k and is retroactive to include any early distributions already taken since January 1, 2020. Early distributions will still be taxable at ordinary income rates, but the corresponding tax bill can be paid over three years OR the account owner may instead “undo” the withdrawal by paying the dollars back into their IRA within three years following the distribution date.

 

 

 

Securities offered through LPL Financial, Member FINRA / SIPC. Investment Advice offered through Marks Group Wealth Management, a registered investment advisor and separate entity from LPL Financial.

Marks Group Wealth Management performs in-house analysis on companies.  Statistical information on mentioned companies is obtained from company reports, news releases and SEC filings.  The information set forth herein has been derived from sources believed to be reliable, but is not guaranteed as to accuracy and does not purport to be a complete analysis of the securities, companies or industries involved. Opinions expressed herein are subject to change without notice.  Additional information is available upon request.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments and strategies may be appropriate for you, consult with us at Marks Group Wealth Management or another trusted investment adviser.  Mention of individual equities in this commentary are for informational purposes only and are not intended to represent a recommendation.

Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets.  No strategy assures success or protects against loss.  Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

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

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.

MSCI EAFE Index consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

The Barclays Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment-grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities.

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