US Equity Markets had their worst week since 2008, as fears about the coronavirus spreading meaningfully to the US and across the globe resulted in precipitous declines across the board. After touching all-time high's on February 19th, the S&P 500 has dropped 13.0% over the last 7 trading days including an 11.4% decline last week. For the year, the S&P 500 is now down 8.6%. The Nasdaq fell 10.5% for the week and is now down 4.5% for the year, while the Russell 2000 (small-cap stocks) decreased 12.0% for the week and has now dropped 11.5% for the year.
Global equity markets were not spared either, suffering significant coronavirus declines as well, albeit slightly better than the US. Developed Markets fell 9.7% for the week to bring its losses for the year to 10.9%. Emerging Markets dropped 7.3% for the week, bringing its losses for the year down to 9.8%.
US Interest Rates dropped sharply last week, hitting record lows as investors fled to the safe haven of US Treasuries. The yield on the US 10-Year Treasury closed at 1.14% vs. 1.47% the prior week. The market now believes there is a 100% chance for the Federal Reserve to lower rates by 0.25% and a 94% chance to lower rates by 0.50% at its March meeting in order to combat any economic fallout from the coronavirus.
Of Interest to Us
While equity markets can still go lower, several indicators suggest a short-term bottom in equity markets may be in process, if not already in place. Specifically, over 90% of stocks hit a one-month low on Friday amidst indiscriminate selling, an extreme move that ranks within the lowest 1% of all historical readings. In addition, the 5-day move in individual stocks also ranks within the lowest 1% of all historical readings. Interesting to us as well, the yield curve actually steepened notably last week, moving from 0.12% up to 0.26%, which has historically been a bullish indicator for stocks.
for the week ending 2/28/2020
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