Q1 2020

The first quarter of 2020 will forever be synonymous with the global coronavirus pandemic. In just four months, the spread of COVID-19 has claimed the lives of more than 200,000 people and decimated economies across the globe. The moves in March were unlike any many investors have seen in their careers. The pace of moves, outflows from funds and response from governments and central banks have been extreme and truly historic. Equity markets fell precipitously, though a rally late in the month provided some relief. Six trading days before the end of March, the S&P500 was down 28.7% for the quarter before improving to -20%, with a peak to trough fall of 36%. Credit markets were also badly hit; high yield and investment grade spreads widened out to levels only exceeded during the Global Financial Crisis (“GFC”). US investment grade experienced its worst ever month on record and US high yield its second worst. Certain parts of the structured credit market started to see forced liquidations from mortgage REITs and other levered investors. Commodity prices, other than gold, fell precipitously. Oil was front and centre of this, not just due to the economic slowdown, but also an oil price war between Russia and Saudi Arabia. Oil fell from $66 to a low of $19, a level not seen since 2001. Volatility measures hit levels not seen since 2008 and market circuit breakers were reached 4 times on the S&P500. In fact, the VIX (a measure of volatility of the S&P500) hit the highest level since the inception of the index in 1993, surpassing 2008 highs. The US Dollar benefited from safe haven status and rose 2.8%. Global bonds rallied with the yield on the US year treasury falling from 1.92% to 0.67%. Those bonds already trading at negative interest rates saw more muted gains and whilst lower on the quarter, yields on German 10yr bonds actually rose in March. Some peripheral European bonds (Italian, Spanish) actually saw a rise in yield as investors sought true safe havens.