Weekly Expert Market Perspectives Park Avenue Securities PAS

Market Declines in Worst Week Since March

The stock market started the week hitting key milestone -- the S&P 500 turned positive for the year, and the Nasdaq Composite rose above 10,000 for the first time -- but succumbed to profit taking that handed it its worst week since March. The S&P 500 fell 4.8%, the Nasdaq fell 2.3%, the Dow Jones Industrial Average fell 5.6%, the Russell 2000 fell 7.9%.

A bulk of this week's losses came on Thursday when the S&P 500 declined 5.9% (it reclaimed some losses on Friday). There was no specific news catalyst that contributed to the decline, but some blamed the Fed for its cautious June FOMC statement while others pointed to data showing increasing rates of coronavirus in many U.S. states.

The Fed didn't suddenly change its tune, though, and the market had chosen to ignore the coronavirus threat in recent weeks. The market may have just gone up too much, too fast. At Monday's high, the S&P 500 had gained as much as 48% from its March 23 low despite the uncertainty facing the economy. 

All 11 S&P 500 sectors finished the week with losses ranging from 2.0% (information technology) to 11.1% (energy). The value, cyclical, and bankrupt stocks that exhibited strength early in the week were hit the hardest, while the mega-caps performed relatively well amid a slew of price target increases from brokerage firms.

At this week's policy meeting, the Fed kept the target range for the fed funds rate unchanged at 0.00-0.25%, and its dot plot signaled rates will remain near zero through at least 2022. The Fed's economic projections called for a 6.5% contraction in 2020 GDP, followed by 5.0% growth in 2021. Core PCE inflation is expected to remain below the Fed's 2.0% target through 2020.

U.S. Treasuries ended the week with curve-flattening gains. The 2-yr yield declined three basis points to 0.18%, and the 10-yr yield declined 20 basis points to 0.70%. The U.S. Dollar Index increased 0.2% to 97.11. WTI crude fell 8.3% to $36.24/bbl. The CBOE Volatility Index spiked 47% to 36.09, which reflected increased hedging interest against further equity weakness.

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Past performance is not a guarantee of future results. Indices are unmanaged and one cannot invest directly in an index. Diversification does not guarantee investment returns and does not eliminate the risk of loss.

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.

 

Park Avenue Securities LLC (PAS) is a 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.

 

2020-103549 (Exp 9/20)

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