The first quarter finally came to a close, leaving many unanswered questions about the global health pandemic and the state of the world economy. The coronavirus has dominated the political discourse and media headlines, stoking fear among investors and contributing to increased volatility in the financial markets. During a mere eighteen trading days in the quarter, the Dow Jones fell by close to 11,000 points, bringing an end to the historic bull market that we have enjoyed for over a decade. It is certain at this time that we are firmly in a recession and may possibly endure the deepest economic contraction since the Great Depression. The S&P 500 index ended the quarter down 19%, while conservative fixed income benchmarks provided stability and held their value during the period.
While the end of the bull market has been sudden and painful, the policy response from governments and central banks around the world has been equally forceful. Policy has come in two forms: monetary policy supporting the basic functioning of financial markets and fiscal policy supporting vulnerable small businesses and the growing number of unemployed. In the United States, the Federal Reserve has eased money supply by both lowering interest rates to zero and expanding its balance sheet beyond $5 trillion (which has significantly added to our Federal debt).
The shocking events of the first quarter have exacted a major toll in communities throughout the world, and our collective wellbeing continues to be the highest priority. Unfortunately, economic data releases in the weeks ahead will be dour as the societal toll from the pandemic continues to climb. From an investment standpoint, we will not lose sight of the market’s tendency to stabilize and recover well before the bad news ceases. With that in mind, and through the lens of a long-term investor, we will continue to thoughtfully assess opportunities and overall conditions in the financial markets, while praying for the public health recovery that will be the ultimate catalyst to re-open economies around the world.