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Since our last update, both stock and bond markets around the world have drifted lower over continuing fears related to the novel coronavirus. These fears are justified, but global efforts to contain the virus should eventually lead to a recovery in morale, economies, and cross-asset markets.

Global Markets Update

Markets have continued to react violently in both positive and negative directions on a daily basis over the last four weeks. Last week, the US stock market, as represented by the S&P 500, declined by nearly another 9%. Small US stocks¹ and international stocks² took a heavier toll over the same period and ended the week down approximately 16.5% each. In sum, the past four weeks have seen the US market fall nearly 20%, smaller US stocks drop over 28%, and international stocks lower by almost 25%. Market declines on 3/16 have officially taken the US stock market into bear market territory³.

The Fed & The Federal Government

On Friday, President Trump officially declared a national state of emergency and made available $50 billion in government funding for crisis response and testing. That move was accompanied by tangential offerings of low-interest loans from the Small Business Administration (SBA) and federal loans/grants to the hardest hit industries, most likely the airlines and hospitality industries.

In sync, the Federal Reserve announced on Sunday the lowering of the federal funds rate to near zero percent and extensive intervention in markets to ensure liquidity during this crisis. The Fed was anticipated to take this action on Wednesday, but it is largely believed they made this adjustment on Sunday to avoid liquidity problems on Monday stemming from fears that had grown over the weekend.

Monetary & Fiscal Policy, In Focus

While the drawdowns in global markets have been swift and severe, the actions taken on policy fronts offer a degree of optimism. Specifically, the aforementioned policy actions taken by the Fed (monetary policy) and the federal government (fiscal policy).

Economic theory teaches us that monetary and fiscal policy both have the ability to stimulate an economy⁴, but in isolation their power may have limited effect. Together, however, the impact can be magnified and lead to true economic impetus. As of last week, we are beginning to witness fiscal policy and monetary policy working in tandem.

While the next few weeks will likely lead to extraordinary pressure on businesses impacted by closures and delays due to the virus outbreak, the longer-term recovery should be aided by these policy movements. Specifically, the federal government’s commitment to a $50 billion response package, as well as individual state commitments to support local businesses, will provide support to those companies most affected and allow them to continue providing the products and services we need. The Fed’s actions, in a similar manner, have lowered the cost of debt and will support business indirectly through lower-cost bank lending.

The Markets Ahead

As we mentioned in our prior missive last week, we cannot know what way the markets will move over the coming weeks as we navigate this crisis, and anyone who attempts to say otherwise is purely speculating. But we can say that previous outbreak-driven crises have ended in a relatively short time frame and have always ended in market recoveries.

The old proverb “the darkest hour is just before the dawn” holds a commanding presence in the current situation. With a large portion of the population working remotely, self-quarantining, and distancing socially it can feel like a surreal time to be alive. It can feel a bit ‘dark’ in the world today, and it may very well get darker before we see the light. But given the unprecedented social adjustments, extraordinary government interventions, and global coaction, we believe that the dawn is coming.

It’s important to remember that selling into a market selloff is generally the exact wrong time to do so⁵, with certain exceptions like tax accounting. As the New York Times recently wrote⁶, “the fact that stocks are extraordinarily volatile right now…isn’t a problem with stock investing – it’s a feature!” The volatility provides compensation for taking a long-term view and riding out the ups and downs.

As this crisis continues to unfold and patience is tested for many investors, it’s important to maintain your strategic, long-term asset allocation and work directly with your financial advisor. Changes in lifestyle warrant changes in your investment portfolios; changes in markets warrant patience and a sound financial plan.

Ryan Walsh, CFA® is an investment advisor representative of NWAM, LLC dba Northwest Asset Management and RIA Innovations, an SEC registered investment advisor. This publication is in no way a solicitation or offer to sell securities or investment advisory services. Statistical information, quotes, charts, references to articles or any other quoted statement or statements regarding market or other financial information is obtained from sources believed to be reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. All domestic and international rights are reserved. No part of this newsletter including text, graphics, et al, may be reproduced or copied in any format, electronic, print, et al, without written consent from Ryan Walsh, CFA® and RIA Innovations. Neither Ryan Walsh CFA®, nor RIA Innovations provide legal or tax advice. Please be advised to consult your investment advisor, attorney or tax professional before making any investment decisions. 

As of March 16, 2020. 


Smaller US stocks¹ – as represented by the Russell 2000 TR Index.
International stock markets² – as represented by the MSCI All Country World ex-USA Index.

Market performance statistics³ – sourced from Morningstar, 2020.

Monetary & fiscal policy⁴ – sourced from Investopedia, “A Look at Fiscal and Monetary Policy”.
Market selloff timing⁵ – sourced from Acorns, “Why a stock market ‘sell-off’ doesn’t mean you should sell”.
New York Times equity volatility⁶ – sourced from NY Times article, “How to Stop Worrying and Love a Falling Stock Market,” March 13, 2020.


Cross-asset markets – a derivation of “across assets”, it implies pertaining to various types of assets and their respective markets. Bear market – a market decline of 20% or greater.

Federal funds rate – the interest rate that banks charge other banks for lending them money from their reserve balances (held at the Federal Reserve) on an overnight basis.

The Fed – the United States Federal Reserve, the central bank of the US.

TBG Financial, LLC is a state registered investment advisor in the State of Washington and certain other states. This content is provided by a third party and may not necessarily reflect the expertise of this Advisor. This publication is not intended to provide investment advice and is intended for your information only. This publication is reprinted with the permission of NWAM, LLC dba Northwest Asset Management and RIA Innovations, an SEC registered investment adviser. NWAM, LLC is unrelated to TBG Financial, LLC.