Market Whiplash Likely to Continue

The major market indices finished the week solidly higher reflecting building optimism the aggressive monetary efforts by the Federal Reserve coupled with the $2.2 trillion fiscal spending package approved by Congress should help blunt the economic blow from the coronavirus.

March 30, 2020    |    By Mike Schwager

Performance for Week Ending 3/27/2020:

The Dow Jones Industrial Average (Dow) added 12.84%, the Wilshire 5000 Total Market IndexSM (Wilshire 5000SM) gained 10.48%, the Standard & Poor’s 500 Index (S&P 500) finished up 10.26% and the Nasdaq Composite Index (NASDAQ) tacked on 9.05%. Sector breadth was positive with all 11 of the S&P sector groups finishing higher. The Utilities (+17.68%) sector led the way higher followed by Industrials (+15.43%) and Real Estate (+15.41%).

Index* Closing Price 3/27/2020 Percentage Change for Week Ending 3/27/2020 Year-to-Date Percentage Change Through 3/27/2020
Dow 21636.78 +12.84% -24.18%
Wilshire 5000 25500.56 +10.48% -22.46%
S&P 500 2541.47 +10.26% -21.34%
NASDAQ 7502.38 +9.05% -16.39%

*See below for Index Definitions

MARKET OBSERVATIONS: 3/23/20 – 3/27/20

The major market indices finished the week solidly higher reflecting building optimism the aggressive monetary efforts by the Federal Reserve coupled with the $2.2 trillion fiscal spending package approved by Congress should help blunt the economic blow from the coronavirus. There is little doubt the US economy will post a sharp contraction during the second quarter; however, investors appear to be betting that the monetary and fiscal efforts should keep the economy from sinking into a prolonged downturn.

While the monetary and fiscal pieces of the puzzle are now in place, containment of the virus remains elusive. Globally, the United States now has more confirmed cases than any other country and the number of new cases in hotspots like New York continue to surge. This means social distancing, stay at home orders, and the shutdown of most public gathering places, all efforts to “flatten the curve,” will remain in place for the foreseeable future and continue to create economic uncertainty.

While there is little doubt that the near-term economic impact is likely to be very sharp, there is also a possibility that it could prove relatively short. At some point the virus is likely to run its course, the current “stay at home” orders that many of us are under will be lifted, people will get back to work, and “pent-up” demand will be unleashed, all of which should help the economy begin to stabilize.

Bottoms Tend to be a Process: After hitting the lowest level since late-2016 on Monday (3/23), the S&P 500 staged a +17.55% rally over the following three days, prompting some pundits to claim the worst is now behind. While markets are certainly forward-looking vehicles and tend to bottom several months ahead of exiting recessionary periods, bottoms also tend to be more of a process versus a pivot. In the weeks ahead, uncertainty surrounding the economic impact associated with the coronavirus will remain elevated and we will get constant reminders of the economic damage as the March data gets reported.

A review of past “waterfall” type sell-offs, like we’ve had over the past month, shows that the bulk of the time we do see a “retest” of the lows. In other words, bottoms tend to look more like a “W” than a “V.” The market crash in 1987 may provide a good road map for how this could play out. After staging a 31.5% sell-off that started on October 5 and ended on October 19, the S&P 500 entered into a choppy sideways trading range, that ultimately ended on December 4 when the market retested (and held) the lows posted on October 19.

With that in mind, nobody ultimately knows how or when the market bottom will happen, but for investors who have a longer time horizon, the return profile is beginning to look very asymmetrical, with upside potential over the next 12 to 18 months meaningfully more robust than downside risk over the same time horizon.

The Week Ahead: The focal point of the coming week will be on Friday when the Labor Department reports the March Payroll data. According to Bloomberg, nonfarm payrolls are expected to fall by 100K, and the unemployment rate is forecast to jump to 3.8% (from 3.5%). The expected contraction in nonfarm payrolls will break a streak of 113 consecutive months of payroll gains. Due to their timeliness, initial jobless claims will also be closely watched. Last week jobless claims spiked the most on record, rising by 3.3 million. The trajectory over the next few weeks should shed considerable insight toward the magnitude of increase in unemployment which could occur throughout the second quarter. According to Bloomberg, initial jobless claims for the week ended March 28th are forecasted at 3.15 million. Other data reports of note include; the March Institute for Supply Management (ISM) manufacturing survey as well as the March ISM non-manufacturing (services) survey.


The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally defined as the leaders in their industry. It has been a widely followed indicator of the stock market since October 1, 1928.

Wilshire 5000 Total Market IndexSM represents the broadest index for the U.S. equity market, measuring the performance of all U.S. equity securities with readily available price data. The index is comprised of virtually every stock that: the firm's headquarters are based in the U.S.; the stock is actively traded on a U.S. exchange; the stock has widely available pricing information (this disqualifies bulletin board, or over-the-counter stocks). The index is market cap weighted, meaning that the firms with the highest market value account for a larger portion of the index.

Standard and Poor's 500© Index is a capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Composite Index is a broad-based capitalization-weighted index of stocks in all three NASDAQ tiers: Global Select, Global Market and Capital Market. The index was developed with a base level of 100 as of February 5, 1971.

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