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It was a three-month period like no other. Frightening, catastrophic, crushing, deadly and surreal are just a few of the words that come to mind. The one certain thing is that nobody will look at life in quite the same way again.

But here we are, so let’s review some of the critical market events that have taken place since Covid-19 made its way outside China and to our shores (and the rest of the world).

For the year through the end of April, the S&P 500 was down “only” 9.3%, the Dow Jones Industrial Average “only” 14.1% and the Russell 2000 small-cap index 21.1%. We say “only” because the major April rally took the large-cap indices back from deep into bear-market territory. Major international stocks fared in between US large and small caps, dropping 17.8%. Safety was paramount and bonds did well, although not without some March hiccups—the Bloomberg Barclays US Aggregate Bond Index gained 5%, while cash (3-month Treasury bills) returned 65 basis points. Remarkably, the S&P 500 was up from the end of April 2019 by a little less than 1%.

Client Corner: We write to notify you of an update to our Form ADV Part 2A Brochure, which was last updated on March 16, 2020. We are required to notify you of our annual update, as well as certain material changes to that document. This year, there were no material changes to our Brochure. As a courtesy, you may find the document at You may also request

The market was oddly calm and even bullish in the first half of February, aware of the virus but believing it to be contained. (We actually discussed February and its late-month unraveling after the virus took hold in the previous letter). But March was where things really came apart in the markets. With US deaths starting small and then skyrocketing, particularly in New York and then New Jersey but also in pockets throughout the country, the markets seemed to have one limit-down day after another, interspersed with notorious bear-market rallies. The virus first took hold domestically in Washington State but soon had its biggest impact in New York (City and State).

The market actually tried to rally back the first week of March, hoping the late-February selloff was just a fast correction, but ultimately failed and cracked in the next couple of weeks. When deaths were just starting to curve exponentially upward, the markets hit what may prove to be a bottom on Monday, March 23rd. Ironically, the night before, the Federal Reserve had announced what some call a “bazooka” to help with student loans, credit cards and other liabilities, as well as extending its previous $700 billion commitment. The Fed had cut short-term rates to effectively zero a week earlier. President Trump predicted the stock market would like the Fed’s announcement, but he was sadly mistaken. The markets apparently felt far more help would be needed and that there was a limit to what the Fed could do without fiscal help from Congress. At this point the market was down about 37% from its highs reached barely over a month earlier in what was—excluding the ultimately short-lived crash of October 19, 1987—the fastest and sharpest bear market ever.

The next day, March 24th, the S&P 500 rallied 9% on speculation of an unprecedented fiscal response (the CARES, or Coronavirus Aid, Relief, and Economic Security Act), helping small businesses retain employees and expanding unemployment benefits. The following day saw a morning continuation that faded in the afternoon. Still, the market managed to gain about 11% for the rest of the week from the Monday bottom. With bumps and starts the rally continued, and by midday on April 17—the first trading day following promising news regarding a treatment, remdesivir, from biotech giant Gilead, the market, the S&P 500 had recaptured well over half the loss from February’s high watermark. Few were prepared to say that this trend would necessarily remain in place, but it was a source of relief for many investors.

Other markets took their lumps as well. The yield on the 10-year Treasury predictably dropped sharply, playing its safe-haven role, as stocks sold off. It fell about 100 basis points (one percentage point, a huge move) between mid-February and March 9th. Then something surprising, and disconcerting, happened. Even as stocks continued to sell off, the Treasury yield backed up to 1.18% on March 18th. This suggested investors were rushing not just to safety but to cash, the ultimate risk-free asset. This move quickly reversed, however, and the 10-year drifted back down near where it had been on March 9th.

Credit also was a major issue, and one where the Fed’s actions played a huge role in stabilizing the market. Investment-grade bonds, which typically pay less than a percentage point above Treasuries of comparable length,were suddenly yielding 3-4% more. Again, investors wanted to get out of what they could sell, even if the prices seemed astonishingly unattractive. High-yield investors fared far worse. HYG, an exchange-traded fund for lower-rated bonds, fell by about 22% from peak to trough before rebounding. Municipal bonds suffered a similar decline in a less than two-week span. While banks are universally acknowledged to be in far better shape than they were in the financial crisis, they are still exposed to huge potential loan losses and a nearly flat yield curve (discussed in a previous letter). But the Fed is buying not just Treasury securities but also investment-grade and even some high-yield corporates. It is focusing on so-called “fallen angels”, formerly investment-grade bonds downgraded to junk status, to keep those bonds from going into contagious free-fall from forced selling.

Perhaps the most telling financing event through the crisis involved Carnival Cruise Lines. The cruise operator, traditionally an investment-grade credit, lost about 80% of its value from the beginning of the year as travel ground to an essentially complete halt. To raise $6 billion to give itself the best chance of survival until the virus is contained, the company on March 18th issued stock at $8 per share (it had been above $50 at year-end), while also issuing bonds paying 11.5% and secured by most of the company’s fleet. Months earlier the company could raise unencumbered money 10 percentage points lower. Capping it off, Carnival issued a convertible bond paying a healthy 5.75% coupon that would be convertible at $10 per share—a fifth of where the company began the year. Investors were taking the risk that the company would not recover, but they stand to profit handsomely if it does. About a month later, the stock had risen by more than 50%, and convertible investors were marking their bonds at a 35% gain.

One of the most astonishing events in the crisis was the collapse in May oil futures that took place the day before expiration on Monday, April 20. The futures dropped from around $18 to negative prices in a single day as traders feared they would have no place to put the oil they received. Such an event had never taken place before, and it’s particularly remarkable that such a drop could happen on a single day when the oil market has been increasingly distressed since the coronavirus crisis took hold. Oil prices rallied back considerably over the rest of the week but remained at depressed levels.

By the weekend of April 24th the U.S. case and death tolls had exceeded 900,000 and 50,000, respectively. Yet, despite a losing week, the S&P 500 was only about 1.5% below the high that followed bear-market low set on March 23rd, and had recovered more than half its losses. The investment-grade, high-yield, and municipal markets had similar recoveries, even with Senate Majority Leader McConnell talking about allowing states to declare bankruptcy.

April 29 was a memorable day. Gilead announced positive results in a trial of remdesivir, its Covid-19 treatment, and that took the markets up more than 2% in the morning despite a first-quarter reading showing that the economy shrank by 4.8%, significantly worse than the expected down 3.5%. The S&P 500 continued to advance throughout most of the day, closing up better than 2.5% and trading higher in the aftermarket after good earnings from Microsoft and Facebook. Meanwhile, CNBC reported that pending home sales had fallen nearly 21% in March, but that realtors expected prices to remain stable. Southwest Air Lines, like Carnival, sought liquidity: it raised $4.6 billion through issuing stock and a convertible bond. Unlike Carnival, it didn’t have to give away the store: its $2 billion convertible issue pays a coupon of only 1.25%. The same day, Fed Chairman Powell proclaimed (unsurprisingly) he would keep interest rates near zero until the economy had, essentially, fully recovered from the crisis. Deaths in the US surpassed 60,000 while cases passed the million mark.

The optimism of April 29 faded on the final day of the month, as the weekly unemployment toll of 3.8 million took the total count to a stunning 30 million. Markets fell nearly 1% out of the gate despite overnight strength. California announced the closing of all beaches despite being on a path toward gradually reopening the state’s economy over the coming weeks. The month closed with lukewarm results from Apple and Amazon saying it was spending all its earnings on coronavirus-related issues.

Throughout this incomparable period, it’s important for investors to remember one thing. Investment advisors add value not just by selecting investments, financial planning, or asset allocation. An advisor adds value by managing both clients’ fears and optimism to help keep them on track to reach their goals. This has rarely, if ever, been truer than it is right now. While periodic rebalancing is a good tactic, an impulsive and emotional response to market volatility is not. Your advisors are here to help you stay focused on the long term.

Focus 360 Disclosure: Past performance is not indicative of future results, and inherent in any investment in the market is a possibility of loss. There are inherent limitations in making assumptions due to the cyclical nature of the market.

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