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THE ECONOMY
Despite the continued negative news related to the state of the global economy, there was some
positive news to focus on. First, efforts to slow the spread of COVID-19 (Coronavirus) appear to
be having a positive effect as measured by a slowdown in the rate of new infections. According
to Dr. Deborah Brix, who is advising the administration, the number of newly reported cases of
Coronavirus has declined during the past five days as of April 15th 1. Importantly, there are several
clinical trials that are underway, with one trial being conducted by the University of Chicago,
showing real promise2. Finally, President Trump announced federal g uidelines on reopening of
the US economy.
Unfortunately, the US labor market continues to shed jobs as roughly 5.2 million Americans filed
for first time unemployment benefits for the week ending April 11th. Over the past four weeks
roughly 22.0 million American workers have been displaced by the Coronavirus. While we will
have to wait several weeks until we begin receiving economic data points for April, if the
Conference Board’s Index of Leading Economic Indicators for March are to be believed, the US
economy came to a sudden halt. The index declined -6.7% during March, the largest monthly
decline on record since the index was constructed in 1959.
Source: Bloomberg as of April 17, 2020
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3/1/19593/1/19623/1/19653/1/19683/1/19713/1/19743/1/19773/1/19803/1/19833/1/19863/1/19893/1/19923/1/19953/1/19983/1/20013/1/20043/1/20073/1/20103/1/20133/1/20163/1/2019Change in Pct. (%)Leading Economic Indicators
AndCo’s Weekly Market Update
April 20, 2020
Weekly Market Update
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EQUITIES
US Equity markets posted positive gains for the week with the S&P 500 rising more than 3.0%.
For the month of April, the S&P 500 is currently up 11.3%, and up 28.7% since the most recent
market bottom on March 23rd . While equities remain far below their previous highs (-14.8%), the
recent retracement has been encouraging for investors.
Prior to last Thursday’s announcement by President Trump concerning the reopening of the
economy, the market had been rallying primarily on hopes that the pace of growth of the virus
was slowing and that an effective treatment and eventual vaccine could be developed. As public
conditions related to the virus improve, investors could begin shifting focus towards the
fundamentals and results for the 1st quarter. According to FactSet, of those companies who have
reported actual earning s, only 66% have exceed ed EPS estimates, which is below the trailing
five-year average3. Of those companies reporting earnings, financials such as JPMorgan and
Wells Fargo were significantly impacted as a result of rising loan loss provisions and declining
lending activity.
Source: Bloomberg as of April 17th, 2020
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12/31/191/5/201/10/201/15/201/20/201/25/201/30/202/4/202/9/202/14/202/19/202/24/202/29/203/5/203/10/203/15/203/20/203/25/203/30/204/4/204/9/204/14/20S&P 500 Index
Weekly Market Update
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FIXED INCOME
While stocks rose during the week on optimism regarding the Coronavirus, US Treasury bond
yields fell on concerns about the economy. The US Treasury 10-Year fell roughly eight basis
points from 0.72% to 0.64% as both manufacturing and retail sales pointed to a weaker US
economy. On Friday, the Federal Reserve (Fed) announced that it was planning on paring back
the amount of Treasury bond s it purchases from $30 billion a week to $15 billion. Corporate bond
spreads continued to fall due primarily due to the last week’s announcement that the Fed would
purchase corporate bonds, primarily via ETFs, to support market liquidity. According to the
Financial Times, for the week, more than $10 billion flowed into high yield bond ETFs, eclipsing
the record by more than 50%4.
Source: Bloomberg as of April 17th, 2020
One area of the market that we are watching closely is the municipal bond market. While everyone
is rightly concerned with the potential for increased defaults in corporate bonds, especially high
yield bonds, municipal bond yields have remained elevated in recent weeks as local municipal
revenues are expected to decline due to the pandemic. While non-tax sensitive investors may not
be directly impacted with potential defaults and spread widening in municipal bonds, unique
opportunities may be presented that allow taxable bond managers to add exposures tactically in
client portfolios when opportunities are presented.
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12/31/20191/7/20201/14/20201/21/20201/28/20202/4/20202/11/20202/18/20202/25/20203/3/20203/10/20203/17/20203/24/20203/31/20204/7/20204/14/2020Bond Yields in Pct. (%)US Treasury 10-Year Yields
Weekly Market Update
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Appendix
1. https://www.msnbc.com/msnbc/watch/dr-birx-says-reported-coronavirus-cases-declined-over-
past-five-days-82092101657
2. https://www.statnews.com/2020/04/16/early-peek-at-data-on-gilead-coronavirus-drug-
suggests-patients-are-responding-to-treatment/
3. https://insight.factset.com/sp-500-earnings-season-update-april-17-2020
4. https://www.ft.com/content/19e47570-ba23-4929-988e-9b5f468b20d5
Important Disclosure Information
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