Weekly Expert Market Perspectives Park Avenue Securities PAS

Another Volatile Week in the Books

This week featured the worst day since 1987, two-15 minute trading halts, stimulus/liquidity measures enacted from global central banks, and even an initial salvo in an oil price war. The S&P 500 (-8.8%), Dow Jones Industrial Average (-10.4%), Nasdaq Composite (-8.2%), and Russell 2000 (-16.6%) lost more than 8.0% apiece.

The continued spread of the coronavirus around the globe prompted measures that are expected to reduce growth. Most sporting events in the U.S. were cancelled and a ban on most flights from Europe took effect at the end of the week. Lawmakers in Washington debated various options for fiscal stimulus, but it took the whole week to reach a tentative agreement on package that would allow for 14 days of paid sick leave, unemployment benefits, free virus testing, and small business tax relief.

The New York Fed conducted emergency liquidity operations at the end of the week after spreads on longer-term Treasury securities widened significantly. The ECB increased its asset purchases, the Bank of England made an emergency 50-basis points rate cut to 0.25%, and The People's Bank of China lowered the reserve requirement ratio for some banks by 50-150 bps.

Separately, oil markets were facing a dual threat of weakened demand and oversupply after Saudi Arabia initiated a price war with Russia. Specifically, Saudi Arabia lowered its oil price for April delivery by $6-$8/bbl and signaled production boosts for an oversupplied market after Russia failed to agree to production cuts last week. WTI crude collapsed 25.0% on Monday, surrendering 23.0% for the week.

In the U.S. Treasury market, the yield on the 10-yr note set a new all-time low at 0.40% but finished the week 24 basis points higher at 0.95%. The CBOE Volatility Index, which is commonly referenced as a fear gauge, surged almost 16 points to 57.83-- its highest level since the financial crisis -- as investors rushed for more protection against further equity weakness.

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Data and rates used were indicative of market conditions as of the date shown and compiled by Briefing.com. Opinions, estimates, forecasts, and statements of financial market trends are based on current market conditions and are subject to change without notice. References to specific securities, asset classes and financial markets are for illustrative purposes only and do not constitute a solicitation, offer, or recommendation to purchase or sell a security. S&P 500 Index is a market index generally considered representative of the stock market as a whole. The index focuses on the large-cap segment of the U.S. equities market. Each company’s security affects the index in proportion to its market value. NASDAQ Composite Index is a market value-weighted index that measures all NASDAQ domestic and non-U.S. based common stocks listed on the NASDAQ stock market. Dow Jones Industrial Average is a widely used indicator of the overall condition of the stock market, a price-weighted average of 30 actively traded blue chip stocks, primarily industrials, but also includes financial, leisure and other service-oriented firms. Russell 2000 Index measures the performance of the smallest 2,000 companies in the Russell 3000 Index of the 3,000 largest U.S. companies in terms of market capitalization. MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

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2020-96966 (Exp 6/20)