Author: Ryan Frydenlund

Ryan Frydenlund

February Market Commentary

US stocks sank, posting their worst month since 2009, on concerns over the economic impact of the spread of the coronavirus. After first being mostly contained to China it became evident over the second half of the month that it was spreading globally and would have a significant impact on consumers and business operations. With the vast majority of S&P 500 companies reporting fourth quarter earnings, 70% have beaten expectations. However, many companies have lowered earnings outlooks for the year over impacts from the virus. Economic news was relatively positive over the month, though it had yet to reflect much impact from the coronavirus. US hiring remained strong with 225,00 new hires in January. The unemployment rate ticked up to 3.6%, but it was a result of more people entering the workforce. Retail sales rose and consumer sentiment climbed. Manufacturing unexpectedly improved expanding for the first time since July. On the downside home sales fell by 1.3% in January. Oil descended 13.2% over the month to finish at $44.76 a barrel. In February, US stocks dropped 8.19% and are down 8.29% over the year to date.

Foreign stocks fell as well in February weighed down by the potential impact from the coronavirus. As part of its pledge to deliver on the purchase of US goods, China said it would cut tariffs on $75 billion worth of US goods in half from 10% to 5% and for other goods from 5% to 2.5%. China also launched fresh stimulus measures to support its economy. The government is planning to step in to help businesses adjust their supply chains given the work stoppages that have occurred in the country. Japan’s GDP growth contracted 6.3% in the fourth quarter much worse than the 3.9% contraction projected. The decline was driven by an increase to the national sales tax. The country could enter into a recession if there isn’t a substantial improvement in the coronavirus hampered first quarter. Industrial activity eased in Germany, France, and Spain in December. Emerging markets topped developed markets in February and over the year to date. Foreign stocks dropped 7.93% in February and have declined 10.43% for the year to date.

Bonds continued to surge in February as investors rushed to safe havens over fears of the pace of global growth. In testimony before Congress earlier in the month, Fed Chief Powell said they were watching the impacts of the coronavirus carefully, but the Fed planned to continue its wait and see approach to policy changes in the Fed’s benchmark rate. After seeing significant stock market declines to end the month Powell made a surprise statement that the Fed was ready to cut the Fed Funds Rate to help support the US economy. The 10-year Treasury yield ended the month at 1.13%, down from 1.52% to start the month, a record low. For the month, longer term bonds outperformed shorter term bonds and government bonds were the top performing sector. In February, the US bond market jumped 1.41% and is now up 2.85% for the year.

 

Index Performance  Feb.YTDTrl. 1 Yr.
US Stock (Russell 3000)-8.19%-8.29%6.90%
Foreign Stock (FTSE AW ex US)-7.93%-10.43%-0.06%
US Bond Mkt. (BarCap Int. Gov/Credit)1.41%2.85%8.81%
Municipal Bonds (BarCap 1-10yr Muni)0.63%1.80%5.78%
Cash (ICE ML 3Month T-Bill)0.13%0.26%2.09%

 

Financial News and Portfolio Management Discussion through February 29th

Global stocks plummeted over the week on concerns over the quick global spread of the coronavirus and the potential impact on the global economy. The S&P 500 plunged 11.4% and the Dow sank 12.6% over the week. It took just six days for the S&P 500 to fall more than 10%, the fastest decline from a record high since 1980. Abroad, the FTSE All World Ex US dropped 8.9% for the week. Oil plunged 16.1% to finish the week at $44.76 a barrel. Investors moved to safe haven assets with the 10-year Treasury yield ending the week at 1.13%, its lowest level ever.

Fed Chairmen Powell announced the Fed was ready to cut the Fed Funds Rate to help support the US economy.

Financial News and Portfolio Management Discussion through February 22nd

Global stocks declined over the week on concerns over the continued spread of the coronavirus. The S&P 500 dropped 1.2% and the Dow fell 1.4% over the week. Abroad, the FTSE All World Ex US was down 1.4% for the week. Investors moved to safe haven assets with the 10-year Treasury yield ending the week at 1.47%, its lowest level since September. Gold reached a seven year high of $1,650.

Japan’s GDP growth contracted 6.3% in the fourth quarter, much worse than the 3.9% contraction projected.

China launched fresh stimulus measures to support its economy. The government is planning to step in to help businesses adjust their supply chains given the work stoppages that have occurred in the country.

In minutes from the Fed’s January meeting, officials were becoming more optimistic about the US economy before the coronavirus hit. The uncertain impact from the virus made their outlook more cautious.

Sales of previously owned homes fell 1.3% in January.

IHS Markit’s flash reading for manufacturing and services business activity fell to its lowest level in over six years.

Apple announced it wouldn’t meet its quarterly revenue projections because of the coronavirus.

HSBC said it would cut 35,000 jobs and reduce business lines across the US and Europe and focus on Asia.

Morgan Stanley is buying discount broker E*Trade for $13 billion.

Wells Fargo reached a settlement with the Justice Department and SEC agreeing to pay $3 billion over their fake accounts scandal.

Financial News and Portfolio Management Discussion through February 15th

US stocks ended the week at a new record high shaking off concerns over the coronavirus. The S&P 500 gained 1.7% and the Dow climbed 1.2% over the week. Abroad, the FTSE All World Ex US rose 0.4% for the week. The 10-year Treasury yield was relatively flat, ending at 1.59%.

In testimony before congress Fed chief Powell said they were watching the impacts of the coronavirus carefully, but the Fed planned to continue its wait and see approach to policy changes in the Fed’s benchmark rate.

Industrial production fell 0.3% in January.

Consumer sentiment climbed in February.

Retail sales rose 0.3% in January, the strongest pace since October.

The merger of T-Mobile and Sprint was approved by the US government.