Last week's back-and-forth violent swing on markets ended with just -2% on the S&P 500. As the government moves from prevention to containment--with extreme social distancing implemented through many counties in the Bay Area--I expect further violent swings on investment markets. The unknowns continue to be a heavy weight on asset pricing. Remember these swings will be linked to the digestion of information as it becomes available--the more information, the clearer the decision-making becomes on pricing equities. Lastly, the Federal Reserve met earlier than normal, slashing rates to zero in an effort to support the economy.
Here are the selected commentaries I found of interest over the weekend--including our hosted conference call with Tom Logan from BlackRock on Friday (3/13):
Discussing Virus Induced Market Volatility with Tom Logan from BlackRock -- Friday, March 13, 2020
- Should you have questions, concerns, or want clarification on anything from our call, please don't hesitate to contact me directly
Fed Meets Early, Cuts Rates to Zero -- Cetera Investment Management
- The Fed met early over the weekend in lieu of their meetings scheduled for later this week cutting short-term interest rates by 1.00% to a range of 0.00%-0.25%.
- They also announced a package to boost liquidity in bond markets.
- Fiscal policy is also needed. The quicker Congress can act, the better for the economy.
The investment implications of COVID-19: An update -- Dr. David Kelly, JP Morgan Asset Management
- Dr. Kelly is one of the most respected names in the business in terms of distilling macro economic trends to the easily digestible. He is the Chief Global Strategist and Head of the Global Market Insights Strategy Team for J.P. Morgan Asset Management.
- The economy was very healthy entering 2020, with low inflation, low unemployment and slow and steady economic growth. This fact, and the reality that the virus became a significant global issue late in the first quarter, makes it likely that the first quarter will still see solid real GDP growth.
- In the second quarter, the negative impacts of social distancing should begin to hit the economy hard, with very sharp declines likely in cruises, airlines, hotels, casinos, sporting events, movies, theatres and restaurants among other industries. This will likely result in a negative quarter for real GDP growth both in the U.S. and globally.
- While Dr. Kelly notes that negative GDP growth could continue through the remainder of the year, he sees the first year of an economic rebound coming in 2021. The impact of the virus on the economy and markets should also be softened by monetary and fiscal policy.
Capital Goup CEO Tim Armour on Weathering the Coronavirus -- Capital Group/American Funds
- Time Armour makes some salient points about the likely direction of the economy.
- A graphic included in the commentary which I believe is helpful for perspective on frequency of market declines and length of recoveries:
