April Market and Portfolio Review

Paul Wildberger |
Categories
Investment
Monthly Market Commentary
financial planning

The 1st qtr S&P 500 performance goes into the record books as the WORST 1st quarter decline in history, -20%.  It also marks the fastest and greatest 1st qtr drop in the stock market since WWII.  With the recent revelation that coronavirus-related deaths could reach over 100,000 before things plateau, we are in for a deep recession and stock market decline not seen since the Great Depression.  This because of a fragile economy coming into 2020, unprecedented job losses, and a global economy basically shutdown.

Our portfolios weren’t immune to the declines, albeit much less than the stock market.  Our average portfolio was down -5.5% in the 1st qtr, besting the S&P 500 by 14.5%.

A few highlights and forecasts:

  1. In addition to the precipitous stock market decline, oil plunged by 66% -- the sight of $20/bbl oil is breathtaking.  With the Saudis and Russians continuing to pump oil with abandon, and diminishing demand, we could see oil in the $20s for quite some time.
  1. The stock market volatility was also unprecedented – over the past 2 weeks, the average daily movement was +/- 5%, and will likely continue over the next few weeks.
  1. After last week’s 3.3mm initial unemployment claims, expect a similar figure this week.  Furthermore, some economists are forecasting an unemployment rate north of 30% for April.  This will be a 1-2 month shock, but should return to a more palatable level of high single digits throughout the year – a far cry from the 3-4% range we’ve enjoyed over the past few years.
  1. Our portfolio strengths in bonds, gold, and market shorts will continue to rebound as investors flock to these safe havens.  However, muni bonds in our non-IRA accounts have been down, primarily due to concern about municipalities funding this crisis.  An offsetting factor will be the Federal Reserve’s decision to begin purchasing these muni bonds.  Another weak spot is our Structured Notes linked to oil and gold.  Each of these have 8+ months to recover before their original 15-month term expires. 

Thanks for your patience and endurance through these times, staying focused on the longer-term, a year from now as the stock market continues its descent, and our portfolio continues its strength.