Markets “In a Nutshell” for February 24, 2020
Investment Week at a Glance
Stocks finished down for the week. The Dow Jones Industrial Average was down 1.38%, the S&P 500 fell 1.25%, the New York Stock Exchange Composite (2,000 stocks) fell 0.86% and the average investors index (Value Line Index) was down 0.61%. Foreign stocks (DJ Global ex U.S.) were down 1.88%. Bond prices were higher for the week, with the 10-year U.S. Treasury ending the week 12 basis points lower at 1.46%. (Data source: Wall Street Journal)
Virus Fears Accelerate
The U.S. stock market fell by more than 1% on multiple indexes with fears about the coronavirus accelerating as it spreads to more countries. Apple became one of the largest companies to publicly come out and say that its business would be materially impacted by the virus and while that doesn’t necessarily surprise many investors, the fact that Apple felt the need to come out on its own initiative sent negative shockwaves through the market. The virus’ impact on global supply chains is expected to have the biggest impact on stocks, especially while many of the restrictions from the U.S.-China trade dispute are still in place. It’s obvious now that the market had underestimated the impact of the virus up until last week, but it is still unclear what the full impact will be for the global economy going forward. (Barron’s)
Gold and U.S. Treasuries Shine
With volatility gaining steam in the market, two of the most popular safe haven assets, U.S. treasury bonds and gold, have continued their rise higher in price as investors seek safety in an uncertain environment. As of the end of last week, gold had risen in eight straight trading sessions to a seven year high, increasing its gain for the year to 8.2%. The 10-year U.S. treasury note has continued its sharp rise from last year to drive its yield down to near all-time lows at 1.46%. Even more concerning for the stock market is the yield curve, or the difference in yields between the 2-year treasury note and the 10-year treasury note, which has fallen back down to near the same level as last year when the curve inverted during the heat of the trade dispute. The future remains uncertain and the full impact of the virus is still hard to predict, but the stock and bond markets are now beginning to come to terms with the fact that damage to the global economy is happening. (Wall Street Journal)
The 10-treasury note hasn’t been this low since 2016, when it hit an all-time low. What is that all-time low?
Answer is below.
Have a Great Week!
Answer to quiz:
3. The lowest the 10-year U.S. treasury note has ever been was 1.37% in 2016 (Wall Street Journal).