The Markets – March 18, 2020

Last week was one for the history books.

Mid-week, the World Health Organization (WHO) declared coronavirus a global pandemic. At the time, there were more than 118,000 cases in 114 countries, and the death toll exceeded 4,000 people. On Friday, the Centers for Disease Control (CDC) reported 46 states and the District of Columbia have been affected, so far. As of Friday, there have been 1,629 confirmed and presumptive cases and 41 deaths.

As the need for containment became clear, daily life underwent rapid change. Major gatherings, from sporting events to Broadway shows to industry conferences, were canceled. Travel was restricted. Schools closed or moved to online classes. Restaurants and bars began serving fewer customers. Many Americans began working remotely or, in some cases, not working at all.

Uncertainty about the economic impact of the virus contributed to stock market volatility. Major American stock indices dropped into bear market territory, last week. Bear markets occur when prices drop by 20 percent or more from recent highs. Peter Wells of Financial Times reported:

“…a combination of fears stemming from the coronavirus pandemic, oil price plunge, and a global recession killed off an 11-year bull market. Wall Street’s equities benchmark plunged 9.5 percent on Thursday, its biggest one-day drop since Black Monday in October 1987 and also its fifth-biggest one-day drop since 1928.”

On Friday, President Trump declared the coronavirus a national emergency. Reshma Kapadia of Barron’s reported the declaration freed up $50 billion to support local, state, and federal efforts. It also “…grants new authorities to the Health and Human Services department, and gives doctors and hospitals greater flexibility to respond to the virus and care for patients…”

All three major U.S. stock indices rallied after the national emergency declaration, but it wasn’t enough to recover losses from earlier in the week. Chuck Mikolajczak of Reuters reported:

“The indexes were still about 20 percent below record highs hit in mid-February, and each saw declines of at least 8 percent for the week. Since hitting the highs, markets have been besieged with big swings in the market, nearly matching as many days with declines of at least 1 percent as all of 2019. Friday’s surge was the biggest one-day percentage gain for the S&P 500 since October 28, 2008.”

On Saturday, the House passed a bipartisan economic stimulus and relief bill to provide support while the coronavirus is being contained. It is expected to pass the Senate next week, reported

Erica Werner, Mike DeBonis, Paul Kane, and Jeff Stein of The Washington Post. The current legislation is separate from the $8.3 billion emergency spending bill passed two weeks ago.

The CBOE Volatility Index (VIX), which is known as Wall Street’s fear gauge, traded above 50 every day last week. At the start of the year, the VIX was trading at 12.47, and it has averaged 22.05 during 2020 to date, reported Macrotrends. A high VIX reading indicates traders anticipate markets will remain volatile.

Recent bouts of volatility appear to have been caused by institutional trading rather than individual investors. Abby Schultz of Penta reported:

“…individual investors are largely sitting tight, according to survey data from Spectrem Group in Chicago. About three-quarters of investors with $100,000 to $25 million in investable assets who were surveyed between Wednesday, March 4…and Monday, March 9…did not change their investment portfolios at all in light of the market sell-off…Among those with $5 million to $10 million in investable assets, as well as those with $10 million to $15 million, 31 percent bought stocks in the last 20 days…Among those with $15 million to $25 million, 39 percent bought stocks…”

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, MarketWatch, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

READY FOR A LAUGH? One of the most important things any of us can do right now is to stay calm. Sometimes deep breathing can restore calm. Laughter can be soothing, too. The Mayo Clinic says laughter is a solid stress reliever. “A good laugh has great short-term effects. When you start to laugh, it doesn’t just lighten your load mentally, it actually induces physical changes in your body.” As it turns out, laughing stimulates organs and soothes tension.

In the interest of promoting calm, we offer a few remarkable ways students have answered test questions. Bored Panda explained, “These bright pupils came up with the funniest test answers harnessing the powers of puns and their creativity.”

Test question: Briefly explain what hard water is.
Answer: Ice

Test question: What is the strongest force on Earth?
Answer: Love

Test question: Expand (a+b)ⁿ
Answer: = (    a    +    b    )ⁿ

Test question: Choose the right word: The man [hit/fit] the dog.
Answer: Pet. You should not hit dogs.

Test question: Write an example of a risk.
Answer: This.

Test question: Fill in the blank: I earn money at home by _____.
Answer: I don’t. I am a freeloader.

During these stressful times, we hope you find some moments of humor and good cheer.

Weekly Focus – Think About It

“Prediction is very difficult, especially if it’s about the future.”

–Niels Bohr, Danish physicist and Nobel laureate in Physics

Best regards,

Daniel J. Murphy, CFP®
Murphy Wealth Management Group
60 Merritt Blvd., Suite 106
Fishkill, NY 12524

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