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  • March 23, 2020

Week in Review

Week Ending: Friday, March 20, 2020

Recap & Commentary

Global equity markets suffered significant losses as concerns about the economic impact of the rapidly spreading corona virus intensified. Efforts by governments and global central banks to blunt the financial impacts of the virus have thus far failed to assuage worried investors. In the US, the S&P 500 ended the week at its lowest level in three years. Treasury yields rose briefly mid-week as investors bought back into stocks, but the optimism was short-lived as the 10-Year yield dipped below 1% again on Friday. Municipal bonds had their biggest retreat since 1987 as recession fears led to a record exodus from municipal bond mutual funds.
As of Sunday, the World Health Organization (WHO) had reported 316,000 cases of coronavirus globally and over 14,000 deaths. Italy continues to be heavily impacted with its death total surpassing that of China. New York and California imposed “shelter-in-place” measures, effectively shutting down entire cities and restricting non-essential travel. The US and Canada closed their border, the longest international border in the world, on Friday in an effort to slow the spread of the virus. Trade, however, was exempted from the closure.
Central Banks around the world unveiled massive aid packages to support the global economy. The European Central Bank announced a €750B debt-buying initiative while New Zealand launched a spending package equivalent to 4% of its GDP. Oil had yet another volatile week as Russia and Saudi Arabia showed no signs of backing down from their current price war and demand destruction stemming from the corona virus became more apparent.

Economic Bullet Points

Economic data offered a glimpse of the weakness that is sure to follow as U.S. businesses scale back, or stop, operations in the face of the quickly spreading corona virus. Housing starts, existing home sales, and industrial production data were largely positive, beating their respective estimates, but reflected February activity. Retail sales for February, however, missed expectations falling -0.5% from January suggesting that consumer spending was already slowing before the full impacts of the corona virus were being felt.
The first glimpse of how the corona virus impacted the U.S. economy during March, and in particular over the past week and half came in the form of regional business data and unemployment claims. The New York Fed’s Empire State business conditions index fell by a record 34.4 points to -21.5. The weakness was broad-based across a number of sub-components including new orders, average workweek and employment, all of which registered varying degrees of contraction. Similarly, the Philly Fed manufacturing index recorded its largest point decline on record falling just over 49 points to -12.7.
Finally, unemployment claims jumped by 70k to 281k. While still low in absolute terms, the percentage increase (33%) was larger than any weekly increase experienced during the financial crisis.

Of Note

Despite growing recession concerns, a number of the world’s largest companies, including Exxon Mobil, PepsiCo, Bank of America, and Verizon issued a total of $25B in debt during the week.

Market Indices Week of 03/20

S&P 500-15.0%
Small Caps-16.2%
Intl. Developed-5.8%
Intl. Emerging-9.8%
Commodities-6.4%
U.S. Bond Market-2.9%
10-Year Treas. Yield0.85%
US Dollar3.8%
WTI Oil ($/bl)$22
Gold ($/oz)$1,499

The Week Ahead

  • Durable Goods
  • 4Q GDP
  • Personal Income
  • Consumer Spending
  • Core Inflation
  • Consumer Sentiment

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