Weekly Investment Strategy

Key Takeaways

  • ‘Bearing witness’ to unprecedented volatility
  • The fed ‘bears a hand’ in stabilizing the economy
  • US consumers will eventually ‘come out of hibernation’

The economic and financial market carnage of the coronavirus continued in yet another unbearable week for investors. The S&P 500 suffered its worst daily decline since October 1987 on Monday, and has fallen ~30% from its February 19 high—the fastest decline and entrance into bear market territory in the history of the US equity market. ‘Bear in mind’ this level of volatility is unprecedented too, as we have seen eight consecutive days of 4% swings in the market for the first time ever. But despite these chaotic movements, we are ‘bearing witness’ to a national, collective effort to ‘come together’ in this time of need and overcome not only the virus but its subsequent impact on our economy. ‘Bear with us’ as we explain why this effort by policymakers, US corporations, and consumers to confront the coronavirus is the reason why we remain optimistic longer term.

    • Fed Action ‘Bears Testimony’ To Their Promise To Act | The Federal Reserve (Fed) was among the first to act, announcing two interest rate cuts during emergency meetings to reduce rates to zero, implementing trillion dollar facilities to ensure the proper functioning of the commercial paper and credit markets, and undergoing significant overnight repo operations. This week, the Fed ensured the backing of the US money market fund industry when prime fund redemptions began to rise and launched a program for currency swaps with nine other global central banks. While it appears the Fed’s scope of policy measures may be nearing its limits, we believe it will expand its balance sheet and possibly expand the scope of its purchases to include both corporate and municipal bonds. No matter the measures taken, our belief that the Fed will remain proactive and continue to ‘bear a hand’ in ensuring the stability of the economy and financial markets is unchanged.