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BMT Monday Market Insights – April 20, 2020

Market Insights

Top Weekly Themes

  1. That Escalated Quickly. The employment picture in the U.S. continues to darken with initial jobless claims of 5.245 million for the week ending 4/11. This is the fourth consecutive week of initial jobless claims in the millions. The one potential positive is that the period-over-period change is slowing from its peak of 6.867 million claims for the week ending 3/28. The continuing claims data continues to climb with a lag, recording 11.976 million individuals claiming unemployment insurance in the U.S as of April 4. Individuals currently claiming unemployment insurance benefits reached a rate of 8.2%, exceeding the previous high of 7% set in May 1975 and the 5% seen during the 2008/2009 Great Financial Crisis. It will be a few weeks before the U.S. Bureau of Labor Statistics publishes April unemployment data. Still, it seems plausible we could eclipse the 15 million level set during the aftermath of the Great Financial Crisis. These are sobering numbers that will likely get worse, but all is not lost. It is important to consider the substantial amount and brisk pace of monetary and fiscal stimulus injected into the financial system, helping to bridge the economic gap.
  2. Turn It On Again. New daily confirmed cases in the U.S. have flattened and have started to decline modestly, raising the question of when and how do we re-open the U.S. economy. During the past week, there have been multiple reports of state governors coordinating together in specific regions on a phased re-opening of the economy over the coming weeks. The case data in New York has been tracking Italy, albeit with a two-week lag. Recently, Italy has started to allow some businesses to re-open, providing some guidance toward normalization in the U.S., hopefully in May. We view this as a positive, but also as a big risk. If policymakers get it wrong, and cases again start to escalate, the health crisis and subsequent economic damage could worsen.
  3. So Far, It’s Not Pretty. First quarter earnings season kicked off with the financials sector and banks in focus. As of the morning of Thursday, April 16, seven banks in the S&P 500 had reported Q1 2020 results, with six missing EPS expectations and one recording a positive surprise, with overall net income down 63% year-over-year. Our takeaway from many of the earnings reports we participated in, was that much of the earnings decline was the result of banks setting aside reserves for the expected losses yet-to-come from the economic fallout in the U.S. Also, while the environment could change rapidly, management teams feel comfortable maintaining dividends if current economic conditions do not drag beyond 2020.

Returns Table

Week (%) YTD (%) 1-Year (%) 3-Year (%) 5-Year (%) Div Yield (%)
S&P 500 0.4 (21.412.8) (11.8) 1327.4 47.4 2.07
Russell 1000 Value (3.7) (22.6) (14.6) 0.5 13.9 3.17
Russell 1000 Growth 3.4 (5.1) 8.3 54.2 77.9 1.19
Russell 2000 (7.5.5) (29.1) (24.4) (8.7) (0.7) 1.89
MSCI EAFE (1.5) (21.6) (15.1) (1.9) (2.6) 4.1*
MSCI Emerging (0.3) (20.2) (16.6) (0.0) (3.4) 3.2*
Week YTD 1-Year 3-Year 5-Year Yield 
Fixed Income
Bloomberg/Barc US Aggregate 0.9 5.0 11.5 16.2 19.6 1.40
Bloomberg/Barc US High Yield 2.1 (8.0) (3.1) 7.4 19.4 7.90
Bloomberg/Barc Muni Bond 0.6 (0.1) 4.6 12.0 17.5 1.91
Bloomberg/Barc Global Agg. Ex U.S. 0.2 (2.1) 2.2 8.0 11.3 0.94
Week YTD 1-Year 3-Year 5-Year Current Level
Crude Oil (WTI) ($/bbl) (12.7) (67.5) (69.0) (62.6) (65.0) 19.9
Natural Gas ($/mmbtu) (2.7) (23.0) (34.4) (47.8) (37.2) 1.7
Gold ($/ozt)  (0.9) 13.2 35.2 33.8 43.6 1,720.4
Copper ($/mt) 2.7 (17.2)  (21.1) (9.8)  (15.8) 5,098.5
1 Week Ago YTD 1-Year Ago 3-Years Ago 5-Years Ago Current Level
Euro/USD 1.09 1.12 1.13 1.06 1.07 1.08
USD/YEN 108.51 108.68 111.93 109.34 119.34 107.57
Pound/USD 1.25 1.32 1.31 1.25 1.49 1.24

As of April 16, 2020 (close)
*Dividend Yield For MSCI EAFE and MSCI EM are from 3/31/2020.

Charts of the Week

Click any chart to view data and axis labels.

Charts/Table provided by Cornerstone Macro

Key Takeaways

  • U.S. retail sales recorded their largest percentage drop ever, falling 8.7% month-over-month in March. This is more than twice the rate of decline witnessed during October and November 2008, -3.9% and -3.8%, respectively. However, motor vehicle-related sales are a significant component of the headline figures and are having an outsized impact. Excluding sales of vehicles and parts, the month-over-month decline is still worse than 2008, 4.48% vs. 4.04%, respectively, but not nearly as dramatic.
  • The shift from eating out to eating in as a result of shelter-in-place appears to have been more of a re-allocation than a destruction in retail sales in March. While not a complete dollar-for-dollar exchange, the movement of spend from restaurants to grocery stores cushioned retail spending as panic buying at grocery stores nearly offset the sales decline for restaurants.
  • The COVID-19 pandemic will have lasting impacts on how consumers eat, work, and play. This is likely to result in changes to industry business models and go-to-market strategies. Social distancing procedures on face-to-face transactions has likely driven the significant drawdown in motor vehicle sales. While the acceleration to online grocery shopping remains a headline focus, other industries could see faster digital disruption than previously expected.


The Investors Intelligence Weekly Sentiment survey for Bulls vs. Bears finally crossed with more Bears than Bulls in mid-March. This survey tends to overlap at market lows although, it seemed slow to react to recent events, most likely a result of the unprecedented and rapid deterioration COVID-19 has caused compared to past declines.

However, this survey could bounce around quite a bit and does not declare the “all clear” or a recovery is right around the corner. What the sentiment data does provide is a necessary step in the market bottoming process and signs investors are coming to grips with the economic impacts unfolding from this global pandemic.

Sentiment Survey for Bulls vs. Bears

Sentiment survey for Bulls vs. Bears
Sources: Factset, Inc. and BMT

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