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Global Markets Update

After the initial violent and downward reactions in markets around the world, the latter part of March has witnessed some reprieve. Last week, the US stock market, as represented by the S&P 500, rose over 10%. Small US stocks¹ and international stocks² have moved in tandem and rose last week by 11.68% and 9.31%, respectively. Despite these positive performances for the past week, since February 20th the US market has dropped nearly 25%, smaller US stocks dropped approximately 33%, and international stocks are lower by almost 24%. Core fixed income markets³ have remained fairly flat over the past month.⁴

Fiscal Fisticuffs & Monetary Melee

In our prior missive we mentioned the initial fiscal and monetary policies being employed by the federal government and the Federal Reserve (the Fed) to combat virus impact. Since then, both have unleashed a bazooka of stimulus and programs aimed at calming markets and providing compensation for those furloughed or unable to work during this situation.

So, what has the Fed done? In a single week it unleashed six initiatives to support markets⁵. Three of those programs target affordable credit to large employers, two support affordable credit to consumers and small businesses, and one aims to bolster money market mutual funds so as to keep investors whole on their cash investments. These are all part of the Fed’s powers under the Federal Reserve Act, which allow it to extend credit to businesses backed by US Treasury loan guarantees in the presence of unique or unusual circumstances.

On the fiscal side of the coin, Congress this past week passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act. While increasing the size of federal spending by 45% this year⁶, the CARES Act provides support for numerous private and public efforts. One of the major components of this legislation will be the $290 billion in direct payments to Americans, whereby a large number of individuals will receive $1,200 for adults and $500 for dependents or children⁷.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act

In addition to both the Fed and federal government creating their own programs and initiatives to combat the economic slowdown, a key component is their joint effort through Treasury-backed Fed lending. To date, Congress has approved $454 billion for Fed credit programs. But because the Fed expects the overwhelming majority of its loans to be repaid, it can lend out funds on a leveraged basis⁸. In other words, many believe the $454 billion of approved Treasury funds can be turned into somewhere in the ballpark of $4 trillion in Fed loans.

State of the Outbreak, In Brief

Global novel coronavirus cases are fast approaching 600,000, and confirmed deaths are now over 26,000⁹. On a raw basis that translates to a greater than 4% mortality rate. But local mortality rates differ largely by country in a manner that doctors and scientists are not yet fully able to explain. In Italy, the hardest hit country in Europe, that rate is now close to 11%. In the US, on the other hand, the current rate stands just above 1.5%¹⁰.

As we continue to fight this outbreak, it is inevitable that new cases will be confirmed and new fatalities will result. But the experiences in China and South Korea as well as the drastic social distancing in the United States gives us hope that we are flattening the curve and should see progress towards that end.

In a report¹¹ released on March 25th based on data from Johns Hopkins, it appears that certain states are beginning to have some degree of success battling the outbreak. Washington state, in particular, seems to have made progress on halting the exponential growth and bending the case curve. If other efforts at containment are successful, we would hope to continue to see similar results.

Looking Ahead

As the markets reflect and the news reminds us daily, we live in uncertain and unfamiliar times. A global pandemic is a possibility few were prepared to withstand. As investors, it’s important to remember that markets don’t like uncertainty, and they respond poorly and drastically to fear.

But they also respond in anticipation of events to come and adjust as those events progress. Markets are pricing in a great deal of fear and economic contraction, but the unprecedented fiscal, monetary, and health responses should lead to recovery.

In the next few quarters in the United States, it’s possible that we will witness our first recession in over ten years. But a recession is generally a signal of the end, and not the beginning, of a bear market¹². Until then, we will continue to witness markets wax and wane, sometimes violently. But for strategic investors, this is a time to stick with your financial plan, rebalance as necessary, and consult your financial advisor. Emotion is the enemy of investing. Planning, patience, and a strategic focus are the signposts for long-term success.

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 which we believe 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 28, 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.

Core fixed income markets³ – as represented by the Bloomberg Barclays US Aggregate Bond Index.

Market performance statistics⁴ – sourced from Morningstar, March 28 2020.

Federal Reserve initiatives⁵ – sourced from The National Law Review, “Summary of Federal Reserve Credit Facilities Announced March 17-23, 2020”, March 27 2020.

Increase in federal deficit⁶ – sourced from First Trust, “Cut the Politicians’ Pay,” Brian Wesbury and Bob Stein, March 23 2020.
Bloomberg CARES Act⁷ – sourced from Bloomberg, “Here’s What’s in the $2 Trillion Virus Stimulus Package”, John Harney. March 25 2020.

Treasury-backed, Fed leveraged lending⁸ – sourced from NY Times, “How the Fed’s Magic Money Machine Will Turn $454 Billion into $4 Trillion”, March 26 2020.

Coronavirus case/mortality⁹ – updates from the World Health Organization (WHO), “Coronavirus disease (COVID-19) Pandemic”, March 27 2020.

Coronavirus mortality rates by country¹⁰ – updates from Worldometer, “COVID-19 Coronavirus Pandemic”, March 27 2020.

COVID US State/Territory Report¹¹ – data from Johns Hopkins CSSE, compiled by Wade Fagen-Ulmschneider, University of Illinois. March 25 2020.

Recession/Bear Market¹² – reference from Morgan Stanley, “Bear Markets End with the Cycle”, March 23 2020.


Money Market mutual fund – a mutual fund that invests in short-term, low credit risk debt instruments and often serves as a substitute for straight cash.

Federal Reserve Act – passed in 1913, the law created the Federal Reserve system and endowed it with certain responsibilities including the ability to print money.

Treasury-backed Fed lending – lending executed by the Federal Reserve using cash supplied by the US Treasury, i.e. the American taxpayer.

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.