March – April 2020

U.S. Economic and Market Highlights


  • For the short-term, the market remains fixated on the virus outbreak as well as policy response. Shutting down the global economy is not a viable long-term solution. The current economic “pause” across developed market geographies should buy time to slow down the spread of the virus, and enable governments to cushion the slowdown with stimulus.

  • The U.S. Congress passed another spending package in April worth $484 billion to help small businesses and hospitals. In many parts of the world, announcements of guidelines were made to reopen parts of the economy where COVID-19 cases declined and testing increased.
  • Monetary easing from central banks will likely continue as external demand has weakened and the global growth outlook has deteriorated.
  • Interest rate cuts and oil production cuts should provide an additional boost to kick-staring the economy. As borders have closed to foreign visitors, the most immediate disruption is in the tourism industry, where in many countries of the world is a key growth driver.


  • Cumulative jobless claims in the U.S. over the past five weeks have reached more than 26 million as a result of the COVID-19 crisis. Job losses associated with the pandemic have erased all of the 23 million jobs created since the 2007-2009 Great Recession.
  • The Composite PMI Index (Purchasing Managers’ Index, a manufacturing performance measure) fell to its the lowest reading since 2009 in most developed countries. In the U.S. factory output dropped by the most since 1946, signaling a massive reduction in inventory levels.
  • The price of crude oil (WTI) collapsed into negative territory for the first time in history. The sharp turn in oil prices delivered a significant negative impact on the economies of Colombia, Brazil, Argentina and Mexico.
  • On the other hand, the delayed outbreak in Latin America may have provided extra time to take advantage of faster testing equipment, best-practices from other countries, and an eventual vaccine. In a period of steady global recovery, countries in Latin America could show some of the best price performance.


  • In government bond markets, investor sentiment has been more “risk-off” thus driving yields downward. The U.S. 10-year Treasury bond fell below 0.60% several times over the last 6 weeks, resulting in a (Bloomberg-Barclays) Aggregate Bond index increase of 4.95% year-to-date as of late April.
  • There has been a record number of bond downgrades, by rating agencies, due to slow economic activity guaranteeing lower revenue and cash flow performance in 2Q. The Fed took action by extending their Credit Facility to include the purchase of recent “fallen angels” and some high yield bond ETFs. Some of the better-known fallen angels include Kraft Heinz and Ford Motor Company.
  • History shows that returns during recovery periods of fallen angels (companies’ bonds that were recently downgraded from investment grade to high yield status) have consistently outperformed the broader high yield index.


  • During the one month ending March 23 the S&P 500 U.S. Stock Index fell -33. 5%. During the subsequent month through April 24 the S&P 500 recovered more than half of the decline with a year-to-date return of -12.2%.  The MSCI EAFE international stock index YTD is down -16.42%.
  • The recent rebound from previous declines were primarily because of strong performance from the consumer discretionary, technology and health care sectors.
  • Markets remain volatile and some analysts have predicted another market drop before a sustainable recovery. Many investors see the current environment as an opportunity to purchase high quality companies at discounted valuations.
  • The outbreak has changed consumer behavior, and may have long-term impacts, as people shift to online shopping. Although, companies with strong management and robust balance sheets in traditional bricks and mortar marketplaces will likely be able to withstand the temporary downturn and emerge stronger once normalcy resumes.
  • In Latin America, Emerging Europe, Middle East, and Africa many sectors are dominated by small, fragmented, and independent operators that do not have the financial strength to survive the current economic downturn. Thus other, the more financially stable companies will take advantage of this opportunity to increase market share for years to come.
  • When examining past virus outbreaks and associated market weakness, there have rarely been lasting impact. Markets have tended to be at their weakest point when the hysteria around the outbreak is highest. Of the eight most recent virus outbreaks globally (Zika, Ebola, MERS, Cholera, Swine Flu, Dengue Fever, Avian Flu, and SARS), markets were higher 12 months later in seven of those cases. In all cases, markets were higher 24 months later.
  • While the duration of the impact from Covid-19 weakness is difficult to predict, we do not believe that the virus will make a lasting dent on the medium-term global economic growth trajectory.

This communication was prepared for informational purposes only and is not an offer to buy or sell or a solicitation of an offer to buy or sell any security/instrument or to participate in any trading strategy. Past performance is not indicative of future results.