Market Update: 3-20-20

March 20th, 2020

This was a rough week for stocks and financial markets. Confirmed cases of coronavirus continue to rise, and much of the country/world has entered into a period of social distancing and/or lockdown for an unknown length of time. Given this uncertainty, the impact on the economy is difficult to quantify, which in turn has sent jitters/fear/panic throughout financial markets. (But tomorrow is another day)

Where the market stands

Dow: 19,173.98
S&P 500: 2,304.92
Nasdaq: 6,879.52
All three major indices were down on Friday (Dow down 4.6%, S&P 500 down 4.3%, and Nasdaq down 3.8%), after several volatile days of trading.

For the week: Dow down 17%, S&P 500 down 15%, Nasdaq down about 13%


From the peak: Dow down 35%, S&P 500 down 32% Nasdaq down 30%

Treasury yields remain near historic lows, with 10 year Treasuries yielding less than 1%. So if you bought them now and held them for 10 years, you would earn less than 1% on your money. (When things are bad, investors flee to bonds for “safety” and prices are inverse to yields. So high prices means the return, or yield, you’ll earn will be lower.)
Crude oil prices declined more than 35% for the week to just under $20/barrel, and they’re off nearly 70% from their high in January of about $63/barrel.
As for precious metals, gold was down about 2% for the week, silver was down about 14%, and platinum down about 20%.
But not all segments of the market experience the same end to the week. Interestingly, a number of hotel and casino stocks rallied during the second half of the week, albeit off of bruising midweek lows. They remain some of the hardest hit stocks over the past month.
Also of note, high grade corporate bonds had a tough week, suffering large losses. The Blackrock Investment Grade Corporate Bond ETF (LQD) was down 13% for the week. High grade bonds are considered to have lower credit risk (risk of not paying back the loan) than high yield, or junk bonds, and are generally expected to offer some safety during bear markets. However that wasn’t the case this week.

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What the government is doing

In efforts to help prevent a severe economic downturn, the US government (along with governments around the world) is taking action through fiscal and monetary policy.
• Last Sunday, the Federal Reserve cut interest rates to 0% and announced a new round of quantitative easing by committing to buy government bonds and mortgage-backed securities. (Financial action taken by the Fed is called “monetary policy”).
• Congress is in discussions over a proposed 1 trillion dollar (or more) relief plan, which would be the third coronavirus stimulus package from the US government. (Financial action taken by the Treasury/Congress is called “fiscal policy”).
• President Trump announced borrowers with federal student loans can pause their payments for 60 days without accruing interest. (Also, given how low interest rates are, if you have private student loans, you might be able to save money by refinancing.)
• The Treasury Department announced they are extending the tax deadline to July 15th to give people an additional three months to file their taxes. (We also have a recent post about using automated tax software if you haven’t prepared your taxes yet.)

So what should you be doing?

First and foremost, focus on your health and the health of others. We talk finances here, but people always come first. So please do your part and be smart. (CDC guidelines)
In terms of investments, as we mentioned last week, probably the best course of action is to sit tight. Corrections like we’re experiencing are part of investing (admittedly a painful part). And to be honest, no one really knows how things will play out (yes, stocks could go down a lot more from here). But eventually markets will recover, sometimes quickly, and you don’t want to alter your long-term financial plans based on in-the-moment emotions.
So do your best to stay calm and stick to your long-term plans. We know it’s not easy.
And if you have cash on the sidelines that you’ve been meaning to invest, now could be a good time to put some of that money to work. But be sure to be thoughtful and systematic, and don’t assume you’ll see a rapid return on your investment. It’s possible stocks bounce back quickly, but there’s no reason to assume it will play out that way.

More to come

We’ll be back for more market updates as things unfold, and you can follow us on social media @ findwesdotcom (Facebook, Twitter, Instagram, LinkedIn). Or you can enter your email below – we won’t spam you with a lot of nonsense or share your information.
So until next time, wash your hands, be smart, be safe, and help out others when you can.

Anything else we can help you with?

► Read our recent post “Are stocks cheap now?”

► Check out our Investing Cheat Sheet for a general overview of investing

► Learn how to file your taxes quickly and easily with tax preparation software

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