April 2020

Review: First Quarter 2020

Total Disruption

As the first quarter progressed, the worldwide pandemic took shape. It has impacted everything in our lives. I don’t think any of us would have suspected a “New Normal” like we are seeing today: the number of people who are out of work; The businesses that are shut down, some of which may never recover. The elderly, the homeless, the migrants and all the people who are enduring hardships.

The good news in all of this is that people have stepped up. Our first responders including doctors, nurses, orderlies, EMT workers, firemen, policemen; plus grocery workers, truck drivers, mailmen and the countless number of other people who are providing us with services, while putting their own health at risk. We appreciate them all and pray for their safety.

I’d be remiss not to mention the people, organizations and corporations who have stepped up to help in other ways. The sharing, helping, giving and innovative spirit of the American people is in full bloom. With all of this going on that to discuss finances and the economy is almost a sacrilege. However, as we finally begin to move away from sheltering at home and safe distancing the economy must come back.

Looking Ahead

In 2008, when we went through our last recession, the government was late in providing help and the Federal Reserve (“Fed”) was slow to respond to the financial crisis. That hasn’t been the case this time. Normally, the Federal Reserve only acts when they are having a scheduled meeting. The scheduled meeting for March was on March 17th. Had the Fed waited until then to act, we would have seen such severe financial disruptions that it is possible we would have been in dire financial straits, from which recovery would have been lengthy. The Fed didn’t wait. In early March, the Fed reacted in a bold way. People were going to banks and withdrawing large amounts of cash, fearing that banks would crash, and cash wouldn’t be available. The Fed flooded the banks with cash and changed the reserve requirements to strengthen the banking system. Shortly thereafter, the liquidity in the bond market became tenuous, and the Fed began buying corporate bonds and put liquidity back into the markets. It is my belief that the Fed, in a very efficient manner, saved the financial markets from a meltdown. These actions strengthened the U.S. financial system and have given us a foundation for the future.

While the Fed acted swiftly, the U.S. government also began putting together a relief package. The package that was passed is to help the unemployed, workers around the country, small businesses and some large businesses. While large numbers nation’s businesses are closed, the relief package is designed to keep the economy afloat until people can once again begin going back to work. The speed with which this relief package was designed, by bipartisan legislation, is unprecedented. Checks going out to individuals and families have already been sent to those whose tax returns specified a bank account. The rest will go out shortly. The extra $600 per week for those filing for jobless benefits have begun to arrive. The process is slower than perhaps we’d like, but it is incredible. What the Fed and the Government have done, in rapid fashion, should be very helpful to our economy going forward.

Numbers Review

The S&P 500 ended the first quarter at 2585, down 646 points from the beginning of the year, for a loss of 20%. The S&P Mid Cap index closed the quarter at 1443, down 620 points, for a loss of 30%. Small cap stocks, as measured by the S&P Small Cap 600 index, were at 685, down 32.9% for the quarter. The DJ Global ex U.S. index for international stocks ended at 200, down 24.2% for the quarter.1

Bonds, unlike stocks, had a solid gain for the quarter. The 10-year Treasury went from 1.91% down to 0.58% resulting in an investment gain of 13.32% for one year. In a like manner, the Bloomberg Barclays US Aggregate Bond Index fell to 1.48%, for an 8.9% gain for one year.1


This has been a very difficult time in the world. The market reflects some optimism. At the low point for the S&P 500, on March 23rd, the average was down 33.8%. As noted above, by the end of the quarter it had recovered about 14% of the loss.1 As of this writing, it continues to show improvement. This reflects the actions that have been taken to stem the pandemic, and fiscal policy that has been implemented. The markets are still unsettled, and we expect continued volatility. While diversification has not been a panacea, diversification, especially based on levels of willingness to take risk, have been helpful.

Ed Mallon


1 Markets Digest, Wall Street Journal, April 1, 2020