It's no secret: this has been the worst week for U.S. stocks since the financial crisis. U.S. indices have entered correction territory—the fastest correction on record for the S&P 500—and the U.S. market outperformance comparable to the rest of the world is rapidly narrowing. But, like greed caused the market to be overbought at its highs, is fear now leading to overselling? The suffering isn't limited to equities; industrial commodities are also taking it on the chin this week. Conversely, gold—like many other safety assets—has surged, but could the precious metal be poised for a repeat of its '08 crash? U.S. Treasuries, another popular safety asset, have also seen a surge in demand that sent yields plummeting to all-time lows, and it looks like the yet-resilient high yield market is finally starting to show some warning signals as well. The market's already pricing in four additional rate cuts from the Fed this year... could we see another cut as soon as next month?
1. The dates are unclear in this chart, but since WWII, this has been the fastest correction EVER...
Source: WSJ Daily Shot, from 2/28/20
2. Is the mega-cap U.S. leadership finally changing? The gap between U.S. and all international equity is closing fast...
Source: WSJ Daily Shot, from 2/28/20
3. Just like the markets got ahead of themselves on the way up, now they appear to be oversold on the way down. Is it a classic greed and fear scenario? As always, we believe that human emotion does not belong in the investment process!
Source: WSJ Daily Shot, from 2/27/20
4. Is this latest bull over?
Source: Visual Capitalist, New York Life Investments; Yahoo Finance, Figures as of 2/13/19
5. Most industrial commodities are fairing no better than equities...
Source: WSJ Daily Shot, from 2/28/20
6. In 2008, the "great diversifier," gold, got crushed along with most risk assets. Will it happen again?
Source: Bloomberg, from 2/27/20
7. Our proverbial canary in the coal mine, high yield bonds, is also begging to show a caution signal...
Source: Bloomberg, from 2/28/20
8. Bond yields across the globe continue to decline.
Source: WSJ Daily Shot, from 2/27/20
9. With U.S. Treasury yields at historic (all time) lows, mortgage rates are following suit. This is a great action item for everyone... but don't wait!
Source: WSJ Daily Shot, from 2/28/20
10. The current Fed has been reasonable and accommodating to economic swings. We don't see them standing by...
Source: Bloomberg, from 2/28/20
11. With all due respect to our line of work, a reminder that the stock market is a first world problem...
Source: Deutsche Bank Research, WSJ Daily Shot from 2/27/20
The selloff is unsettling, and the best antidote for anxiety is information. For more thoughts on this week's market activity straight from BCM Portfolio Manager Dave Haviland, check out "From The Desk of the PM - Update on Market Selloff and Coronavirus Fears."
Disclosure: The charts and info-graphics contained in this blog are typically based on data obtained from 3rd parties and are believed to be accurate. The commentary included is the opinion of the author and subject to change at any time. Any reference to specific securities or investments are for illustrative purposes only and are not intended as investment advice nor are a recommendation to take any action. Individual securities mentioned may be held in client accounts.
