Q2 Market Update

Market Update: Q2 2020

Well that was an interesting quarter.  The second quarter of 2020 brought us the fastest selloff into a bear market in history, which subsequently turned out to be one of the shortest in history.  Equities around the world continue to whipsaw investors amid COVID-19 and the resulting fiscal and monetary stimulus packages from governments around the world.  In short, the markets seem to be at odds with the economy.

Interest rates have fallen in lockstep and show few signs of rising any time soon.  This makes for great refinancing opportunities for borrowers, but poor bond yields for long term investors.  These are interesting and precarious times.

Here is this quarter’s market update.

Q2 Market UpdateQ2 Market Update

Q2 Market Update

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Market Update: Q1 2020

Market Update: Q1 2020

Well here we are….one quarter into 2020, and the risk event we’ve all been waiting for has finally arrived.  Volatility as measured by the VIX Index touched all time highs over the first quarter as the Coronavirus spread from China to Italy and the rest of the world.

The stock slide here in the United States was fierce, but a late quarter bounce regained a substantial portion of the lost ground.  More ground, in my opinion, than the numbers really support.

From here, small cap and emerging markets are starting to look like wonderful bargains.  But without knowing the extent of the economic damage & how long the world will be sheltering in place, it’s difficult to make that argument with too much confidence.

Here’s this quarter’s market update.

Market Update: Q1 2020

Market Update: Q1 2020

Market Update: Q1 2020

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Where Do We Go From Here? Market Thoughts & Financial De-Leveraging

Where Do We Go From Here? Market Thoughts & The Risk of Financial De-Leveraging

Well that escalated quickly.  We are now officially in the second fastest bear market on record.  Bear markets become official when stocks fall 20% or more from their peaks.  Ordinarily this takes months to play out.  Bad news comes out, stocks sell off a bit.  Everyone goes home, thinks about it, and comes back the next morning.  More bad news comes out, stocks fall a bit further, and so on.  Here’s some data from Marketwatch on how long it typically takes to enter a bear market:

Where Do We Go From Here? Market Thoughts & Financial De-Leveraging

With the Coronavirus driving the U.S. and much of the world to shelter in place, our economy has come to a screeching halt.  Some forecasters are guessing that we’ll see a 5% drop in GDP this quarter, others are predicting as much as a 30% drop.

Whatever camp you reside in, the picture is not pretty.  Markets did not take long to notice.  Whereas it takes on average 136-137 trading days to enter a bear market based on the data above, it only took us 19 to get there this time – the second fastest on record:

Where Do We Go From Here? Market Thoughts & Financial De-Leveraging

So where do we go from here?  A stimulus package is just about to be passed (finally).  Markets rebounded as much as 12% yesterday and another 4.5% today.  Even though the public health picture still looks bleak, we are starting to wrap our heads around how long the pandemic may continue.

Here are a few things I’m reading and my thoughts on what happens next.

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