In the blink of an eye the market went from an incredible 2019 that ended with a great 4th quarter to one of the worst quarters in the history of the market. In fact, from it’s peak to its trough this quarter, the market fell over 35% and, according to the Standard and Poor’s website, the S&P 500 fell 20% for the entire quarter.
As we discussed in the last newsletter, we were of the mindset that 2020 would be a volatile year given that it is a Presidential election year. However, the timing of the volatility was pulled forward due to the outbreak of the Coronavirus. And the severity of it was ramped way up because of the speed at which the pandemic spread across the world.
Moving forward everyone is awaiting to see the economic impact of the world’s response to the virus, which was, essentially, to shut most economic activity down. Everyone knows that the data will be bad, we just don’t know how bad it will be. And there is no question with a 35% peak to trough drawdown, the market is pricing in some awful data.
About the time everyone gets this newsletter, the data should be rolling in and we will have some good data to work with. Generally, with little data to work with, the market prices in extreme scenarios. We will see if this is the case this time.
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