Investment Review - March 2020

1. Stocks in February experienced an acceleration in volatility as the spread of COVID-19 widened to include all continents except Antarctica. Overall, the S&P 500 returned -9.3%, and the Dow Jones Industrial Average returned -11%. The Nasdaq Composite fared better, losing -7.5% during the month. Each index corrected over 10% from its recent all-time highs reached mid-February.
   

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2. Bond prices surged in February as interest rates plunged, the 10 and 30-year note yields hitting all-time lows in anticipation of slower growth, if not outright recession, due to the likely disruptions to economic activity both globally and here in the U.S. The 2-year note, the most sensitive to Federal Reserve monetary policy fell to 0.88%, signally a likely cut in interest rates. The 90-day – 10-year yield curve inverted for the first time this year, signaling a rising possibility of recession.
   

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3. The stock volatility index or so-called “fear gauge” (VIX) more than doubled, ending the month at its highest level of 40. Gold, after initially rallying 10% to $1,659 per ounce, settled back to end the month essentially flat. Although considered a safe haven asset, some think the yellow metal faded as central banks sold gold to raise liquidity. The U.S. dollar index, or DXY, ended the month up 0.75%, but a level which was down 1.75% from its high of 99.86.

Sources: Bloomberg LLC, U.S. Commerce Department, Bureau of Labor Statistics, Dow Jones Inc., MarketWatch, Standard & Poors, Federal Reserve Bank, FactSet

Disclosure: This commentary reflects the opinions of Welch & Forbes based on information that we believe to be reliable. It is intended for informational purposes only, and not to suggest any specific performance or results, nor should it be considered investment, financial, tax or other professional advice. It is not an offer or solicitation.

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