Market Review – March 2020
EQUITY: US equity markets experienced their worst market decline in over a decade. Significant drawdowns moved most broad equity indices squarely into a bear market in the first quarter. The year began with strong positive momentum as investors’ rose-colored glasses, following the extraordinary returns in 2019, were able to sidestep escalated geopolitical tensions and an airstrike by the US against Iran. The long-waited US-China Phase One trade deal was signed in mid-January as markets were hitting all-time highs. Initial reports on the ensuing COVID-19 pandemic were largely ignored by US financial markets early on as a brief pullback in late January was followed by a climb to a new all-time high for the S&P 500 on February 19th. As the virus rapidly spread across the globe and landed on our doorstep in late February, investors in risk assets, such as equities, were ill-prepared for the impending onslaught.
FIXED INCOME: Bond markets experienced dramatic moves throughout the quarter with no segment immune from severe price volatility and dislocation. As we have noted over the years, insatiable demand for fixed income and yield led to considerable inflows into all forms of fixed income securities. This phenomenon continued unabated during the months of January and February and reversed course considerably throughout March as COVID-19 hit US shores and the global economy began to shut down. As investors across the globe deleveraged and all headed for the exits at the same time, no asset class was spared from a wave of outflows.