April 2020 Financial Market Memo
Last month, despite a pleasant market rally fostered by an immense global stimulus, we continued to witness deteriorating macroeconomic data. Within the last six weeks, U.S. jobless claims have increased by 30 million. To put this into perspective, more jobs have been lost in these last few weeks alone than have been created within the U.S. since the 2008 financial crisis.
The severity of the global shutdown – a direct result of containment efforts in an attempt to slow the spread of COVID-19 – is unprecedented and is also severely affecting consumer businesses of all shapes and sizes. In response to the global shutdown, governments and central banks alike have been aggressive with enacting stimulus plans in an attempt to counteract the fallout from the COVID-19 pandemic. The numerous stimulus plans have, at least in the short run, achieved their objective. In addition to markets bouncing off of their COVID lows, we’ve also come to see a decline in market volatility, compared to the more extreme levels present earlier in the year. Global equity market performance has been positive in April: U.S. markets (VTI) soaring 13.13%, along with international equities – Developed (VEA) and Emerging Market (VWO) – gaining 7.02% and 7.81%, respectively. We saw fixed income markets (BND) rally 2.76% for the month, resulting from the Fed’s commitment to continue purchasing bonds.
Global financial markets seem to be caught amid opposing forces – broad economic & corporate collapse versus an orchestrated infusion of monetary & fiscal stimulus. Although plenty remains unknown about the next chapter in the coronavirus story, much is contingent on the extent to which global economies can successfully reopen. What we do know for certain is the full effects of this pandemic have not yet been felt. Expect further diminishing macroeconomic data along with unattractive corporate earnings. As such, we continue to advise investors to remain prudent and stay the course amid further volatility. We acknowledge times are grim, but also recognize the unprecedented policy response – particularly the willingness of central banks to intervene in credit markets – which appears to be shifting the balance of risks.
Major Market Index Returns
Period Ending 4/30/2020 (Annualized)
Selections include ETFs generally available to consumers. Returns are net of management fees but do not include trading and Advisory fees. Return source: Morningstar. AP disclosure.
Sample Portfolio Mix Returns (Annualized)
Global portfolio mixes are Stocks/Bonds and are represented by VT/BND; returns are annualized. Vanguard funds are net of all management fees but do not include trading and Advisory fees. Return source: Morningstar. AP disclosure.
What You Pay For: The Percentage of Active Managers That Underperform Their Benchmarks
Trailing 10 Years Numbers As of December 31, 2019 — S&P SPIVA Scorecard