Our partners with Merrill Lynch provided some insight regarding the market factors influencing the first quarter of 2020 at our recent Annual Investors’ Briefing. It is their professional opinion that global equity markets were punished while fixed income provided some ballast as the world was impacted by the Coronavirus and its spread across the globe.
- The 11 year bull market has come to a halt as the fastest move to a bear market in history.
- Bond yields fell to their lowest levels on record.
- This all caused by the Coronavirus contagion as well as the collapse of oil prices cause but the split between Saudi’s and Russia.
- In response to this global health crisis (that is now a financial challenge as well), central banks have provided a measured response with the FED specifically lowering rates to zero and adding to its balance sheet as well as fiscal stimulus amounting to over 10% of GDP.
- Earnings and economic numbers released during the quarter had no meaning due to the expectation of US growth dropping to -7% for 1Q20 and YOY down -6.0%.
- While the consumer and employment were the rock of the US economy, both have now been shattered due to virus mitigation policies in the US and around the world.
- Unfortunately, a recession seems all but certain.
We continue to meet with our Board and our advisors at Merrill Lynch regularly, taking a long-term view toward market-based returns. Even at the end of the 1st Quarter, which captured the financial markets’ immediate response to the pandemic, historic returns for the 5- and 7-year horizons were positive. The Investment Committee of our Board of Directors has developed in consultation with our advisors at Merrill Lynch the objectives in our Investment Policy Statement, available for review on our website. Please let us know if you have questions or would like to discuss our policies in more detail.