PAS Weekly Commentary

Historic Sell‐off Steepens as Economy Continues to Shut Down

Wall Street endured wild swings this week, ultimately spiraling lower as the rapid spread of the coronavirus continued to lead to a shutdown of the economy.

The Dow Jones Industrial Average (‐17.3%) led the retreat with a 17% decline, followed by the Russell 2000 (‐16.2%), S&P 500 (‐15.0%), and Nasdaq Composite (‐12.6%).

No sector was spared in this week's carnage with all 11 S&P 500 sectors losing more than 11%, including a 23.0% plunge in the real estate sector. Confidence was lacking among investors, businesses, and consumers despite additional stimulus efforts taken by central banks given the magnitude of the situation.

For instance, California and New York ordered stay‐at‐home restrictions; more companies withdrew guidance, suspended dividends, and temporarily closed operations, which led to many Americans without a job. The latter started to be quantified in the weekly initial claims, which increased by 70,000 to 281,000 ( consensus 220,000) for the week ending March 14.

To support the financial system, the Fed slashed the target range for the fed funds rate to 0.00%‐0.25%, lowered the discount rate to 0.25%, announced a $700 billion quantitative easing program, increased its daily repo operations, established facilities for commercial paper funding and money market mutual fund liquidity, and coordinated with other central banks to enhance liquidity via standing U.S. dollar liquidity swap line arrangements.

A host of stimulus measures were also taken by other central banks, but investors continued to wait for a massive fiscal response.

Congress passed an $8.3 billion relief package that provides unemployment and sick leave benefits, and the FHFA suspended foreclosures and evictions for 60 days for enterprise‐backed mortgages. The $1 trillion+ fiscal stimulus package, which includes direct payments to Americans and aid for businesses, continued to be deliberated.

Oil prices tanked 24% one day, then rebounded 23% the next day after President Trump said he will get involved in the price war between Russia and Saudi Arabia at "the appropriate time." The Wall Street Journal reported that Texas was also considering cutting oil production. For the week, WTI crude still declined 24.3% to $23.73/bbl.

Boeing went through a tumultuous week with shares losing more than 40%. The company asked for at least $60 billion of aid, including loan guarantees, for the aerospace industry; Nikki Haley resigned from the Board; and Reuters reported the company is mulling a production pause.

Even safe‐haven assets faced selling pressure this week in a move that suggested investors were raising cash, which contributed to the 4.1% surge in the U.S. Dollar Index (102.74). Gold futures declined 2.1% to $31.57/ozt, and although longer‐dated Treasuries were down big, they later recouped most losses. The 2‐yr yield declined 14 basis points to 0.37%, and the 10‐yr yield increased two basis points to 0.97%.

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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. Indices are unmanaged and one cannot invest directly in an index. 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. Data and rates used were indicative of market conditions as of the date shown and compiled by 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. Past performance is not a guarantee of future results. 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.

Avenue Securities LLC (PAS) is an wholly-owned subsidiary of The Guardian Life Insurance Company of America (Guardian). PAS is a registered broker dealer offering competitive investment products, as well as a registered investment advisor offering financial planning and investment advisory services. PAS is a member of FINRA and SIPC. Provided by

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2020-97478 (Exp. 6/20)