Overview: Despite emergency rate cuts and accommodative actions to counteract the economic impact of COVID-19, all global markets remained volatile. The S&P 500 continued its selloff from the prior week and ended 15.0% lower. In an effort to mitigate the economic fallout from COVID-19, the Federal Reserve announced a 100 basis point emergency rate cut to 0.0% – 0.25% and a quantitative easing program (more than $700 billion) a week ago Sunday.
The following is from JP Morgan Market Insights: Financial markets have moved swiftly, and are now pricing in a global recession, with the S&P 500 falling into a bear market territory and both investment grade and high yield bond spreads widening out significantly. The areas affected by social distancing (leisure and hospitality, retail, and transportation) represent a larger percentage of overall employment, but a smaller share of GDP than the finance and construction industries did during the global financial crisis (GFC). That being said, a very sharp decrease in consumer spending concentrated in the second quarter could subsequently lead to broader economic weakness in the third quarter. From an earnings perspective, industries impacted by social distancing represent a smaller portion of overall S&P 500 earnings than financials did in 2007, but any impact on the aggregate figures will depend on how badly earnings from the affected industries are impacted. While early indications suggest that this could be a deep recession, the recovery that could take hold, once effective treatments and vaccines have been created and distributed, has the potential to be more robust than the recovery following the GFC as neither the economy nor financial institutions went into this crisis suffering from major imbalances.
Weekly Returns and Data
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