Highlights from March 2020 – Coronavirus now a pandemic; Equities record worst month since 2008; Government bond yields fall further; Major Shock, recession, or depression?

COVID-19 (Coronavirus) now a pandemic

The World Health Organization (WHO) declared COVID-19 a pandemic on the 11th of March. New cases and fatalities are growing exponentially. At the end of March there were about 857,000 cases globally (up from 85,000 at the end of February and 9,500 at the end of January).

The number of fatalities has grown exponentially too to 42,000 at the end of March (up from 2,900 at the end of February and 300 at the end of January).

Major economies in Europe and Asia are in lockdown with at least partial lockdowns anticipated in North and South America.

Almost every country with a population of over 50,000 has recorded cases of the virus.


Equities record worst month since 2008

All major equity markets recorded their worst month since 2008 in March 2020. The January to March quarter was also one of the worst quarters for stocks globally.

The UK FTSE All-share was down 25.1% in the quarter. March 2020 was the worst month for the index since 2009.

In the U.S., the Dow was down 23.2% in the quarter (down 13.7% in March). The S&P500 was down 19.6% in the quarter (down 12.51% in March). The monthly performance for both was worst since 2008.

Japan’s TOPIX was down 17.5% in the quarter and the MSCI Emerging Market index was down 23.6%.

Government bond yields fell further

Government bond yields fell further, and government bond funds had a stellar quarter. U.S. 10-year Treasury yield fell to 0.67% (from 1.1% at the end of February).

U.S. Treasury funds returned an average of 8.4% during the quarter. UK government bond funds returned an average of 7% during the quarter.


Major Shock, recession, or depression?

This time it is different. No one can accurately predict what happens next, we are living in truly unprecedented times. Governments have rolled out stimulus measures to protect livelihoods.

Our view: Governments seem to be just copying each other. From taglines, “Stay home, stay safe” to “Protect lives, protect livelihoods” to copying lockdown measures (which is copy what China did because it apparently worked). Even economic measures seem to be copied – what we will see is lots of money printing, lots of stimulus to save jobs and interest rates heading to zero (and negative).

Unlike previous times, this is a crisis hitting money supply, hitting cash flow (for consumers, businesses and governments), hitting consumer spending in its entirety (expect online and essential spending). Major Shock? Yes. Recession? Certainly Yes. Depression? Probably Yes.

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