Monthly Market Review – February 2020

Highlights

  • The U.S. economy continues to look strong despite coronavirus fears, as they have yet to materialize in economic data.
  • However, the U.S. stock market has priced-in these fears as they dropped over 8.0% during the month of February.
  • Interest rates are also falling as the 10-year treasury yield dropped 38 basis points to 1.13%.

Economic Review

The U.S. economy continues to look strong despite worries of the coronavirus as its impact has yet to materialize in economic data.  Real GDP (i.e. inflation-adjusted) continues to grow at a stable 2.3% year-over-year growth rate.  The U.S. also continues to have a strong jobs market with a historically low unemployment rate of 3.6% and strong jobs growth and wage growth.  Meanwhile, the manufacturing sector continues to struggle from the damage received from U.S. and China trade tensions as durable goods orders and industrial production continue to falter.  However, despite a ‘Phase 1’ trade deal between the U.S. and China, the manufacturing sector now faces new headwinds from the coronavirus.

Market Review

The overall stock market fell considerably in the month of February as investors fears of the coronavirus have them moving money to safer assets.  U.S. small-cap stocks fave suffered the most so far this year with a return of -11.7%.  U.S. large-cap stocks have fared the best so far this year with a return of -8.1% while international developed and emerging stocks are down 10.4% and 8.9%, respectively.  Meanwhile, the price of gold is up 3.8% so far this year as investors flee to the safe-haven metal.

All major factors are in the red so far this year as a result of the coronavirus worries.  Of those factors, dividend and value stocks have suffered the most with returns of -12.8% and -11.9%, respectively.  At the same time, momentum and growth stocks appear to be a little more resilient with returns of only -3.7% and -4.5%, respectively.

Bond Market Review

Conversely to the overall stock market, the overall bond market is largely higher so far this year as interest rates fall considerably and investors flee to safer assets.  That said, long-term treasury bonds (i.e. 25+ years) have benefited the most from falling interest rates as they are up nearly 15% so far this year, while the overall bond market is up roughly only 3.7%.  High-yielding “Junk” corporate bonds have however suffered as they are down approximately 1.7% so far this year as investors flee to the safe investment-grade corporate bonds,  which are up approximately 3.6% so far this year.

Important Disclosures:  Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly from The Market Commentator℠, will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio.  Due to various factors, including changing market conditions, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in The Market Commentator℠ serves as the receipt of, or as a substitute for, personalized investment advice from The Milwaukee Company™.

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