Monthly Market Insights | March 2020

U.S. Markets

Coronavirus fears sent stocks into correction territory in February, as investors grappled with the unfolding story.

The Dow Jones Industrial Average lost 10.07 percent, while the Standard & Poor’s 500 Index dropped 8.41 percent. The NASDAQ Composite fell 6.38 percent.1

Effort and courage are not enough without purpose and direction. John F. Kennedy, 35th President of the United States

The financial markets began the month on an optimistic note, following news that China was undertaking stimulus measures to offset the economic slowdown linked to COVID-19.

Evolving Story

But the markets quickly found themselves reacting to headlines. Stocks rose to new highs on growing confidence that China had reached containment, only to fall on reports of a spike in new cases in China.

Following the Presidents’ Day holiday, markets opened down, as concerns mounted about supply chain disruptions from China. Stocks found some footing, but lost momentum on news of more cases in South Korea.

Long Week of Selling

The selling accelerated in the final week of trading, on news of a surge of cases in South Korea, Italy, and Iran. As the week ended, the major indices found themselves in correction territory.

Sector Scorecard

No industry sector escaped the sell-off in February, with losses in Communication Services (-7.68 percent), Consumer Discretionary (-6.04 percent), Consumer Staples (-6.67 percent), Energy (-17.69 percent), Financials (-8.66 percent), Health Care (-7.73 percent), Industrials (-9.19 percent), Materials (-8.81 percent), Real Estate (-5.27 percent), Technology (-7.79 percent), and Utilities (-5.66 percent).2

U.S. Market Recap for February 2020
S&P 500 -8.41% Month ‌ -8.56% Year-to-Date	NASDAQ -6.38% Month ‌ -4.52% Year-to-Date	Russell 1000 -8.34% Month ‌ -8.28% Year-to-Date	10-Year Treasury 1.13% Month ‌ -0.79% Year-to-Date
Yahoo Finance, February 29, 2020. The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid.

What Investors May Be Talking About in March

At the beginning of 2020, consensus suggested that global economic growth would likely pick up, thanks to the trade deal with China, passage of the United States-Mexico-Canada Agreement, and early signs of an economic pickup in European economies.

But the question now is, to what degree will the world’s economies be slowed by the outbreak?

Investors are expected to watch economic reports out of China and Europe as well as the initial estimate of first-quarter gross domestic product, due at the end of April.

Markets are priced on expectations of the future. But the challenge for investors has been whether the market has properly discounted the economic cost of the outbreak, given the uncertainty of estimating those costs in real time.

If reports show that COVID-19’s impact was higher than imagined, stock prices may retreat. But if data suggests it was in line with expectations, stocks may respond more positively.

World Markets

Global markets ended lower, with the MSCI-EAFE Index sliding 6.32 percent.3

Great Britain’s FTSE 100 lost 9.81 percent as major markets in Europe dropped. France’s CAC 40 dropped 8.55 percent, and Germany’s DAX fell 8.41 percent.4

Pacific Rim stocks also suffered: Australia’s ASX 200 fell 8.21 percent, while Japan’s Nikkei lost 8.89 percent.5

World Market Recap for February 2020
Emerging Markets	February	Year-to-Date
Hang Seng (China)	-0.69%	-7.31%
Kospi (Korea)	-6.23%	-9.59%
Nikkei (Japan)	-8.89%	-10.63%
Sensex (India)	-5.96%	-7.17%
Jakarta Composite (Indonesia)	-8.20%	-13.44%
Bovespa (Brazil)	-8.43%	-10.17%
IPC All-Share (Mexico)	-6.31%	-5.09%
Merval (Argentina)	-11.76%	-15.08%
ASX 200 (Australia)	-8.21%	-3.63%
Europe
DAX (Germany)	-8.41%	-10.25%
CAC 40 (France)	-8.55%	-11.18%
Dow Jones Russia Index (Russia)	-11.38%	-10.51%
FTSE 100 (Great Britain)	-9.81%	-12.98%
Yahoo Finance, February 29, 2020. The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.

Indicators

Gross Domestic Product

The U.S. economy grew at a 2.1-percent annualized rate in the fourth quarter, unchanged from last month’s initial estimate.6

Employment

Nonfarm payrolls increased by 225,000. The unemployment rate ticked up to 3.6 percent, and wage gains also picked up, posting a 3.1-percent annual gain, slightly higher than in December.7

Retail Sales

Retail sales rose by 0.3 percent in January, while December retail sales were revised down, from the initial estimate of an increase of 0.5 percent to 0.2 percent.8

Industrial Production

An unusually warm January that reduced utility output and a halt in 737 MAX airplane production at Boeing led to a 0.3-percent decline in industrial production.9

Housing

Housing starts dropped 3.6 percent in January. Despite the decline, housing starts remain strong, rising 21.4 percent year-over-year.10

Sales of existing homes declined 1.3 percent, fighting the dual headwinds of higher prices and low inventory. Year-over-year sales were higher by 9.6 percent.11

New home sales leaped 7.9 percent, reaching levels not seen since June 2007.12

Consumer Price Index

Inflation ticked up by 0.1 percent in January, held in check by a sharp drop in energy prices. Core inflation, which excludes the more volatile food and energy components, was up 0.2 percent.13

Durable Goods Orders

Orders for long-lasting goods goods fell 0.2 percent. However, excluding the more volatile transportation sector, orders were higher by 0.9 percent.14

The Fed

The minutes of the last Federal Open Market Committee reflected a Fed comfortable with the health of the U.S. economy and its current policy to hold federal funds rate steady.

It’s interesting to note that the coronavirus was referred to eight times in the minutes. The Fed said it would be monitoring the outbreak and its effect on economic activity.15

By the Numbers