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Quarterly Market Review - 1st Quarter 2020

The Blue Water Team

Blue Water presents a market review of the 1st quarter of 2020.  Obviously, the markets were severely impacted by COVID-19.  Here is a quick look at the major stock indices:

 Index

Return For Q1 2020

Dow Jones Industrial Average

-22.7%

S&P 500

-19.6%

NASDAQ Composite

-14.0%

MSCI EAFE Total Return

-22.7%

MSCI Emerging Markets

-23.6%

 

Breaking out various sectors, energy was the worst with a 50.4% decline.  Financials and Industrials lost 31.8% and 27% respectively.   Technology only lost 11.9%, followed by the traditional defensive sectors of Health Care (-12.6%), Consumer Staples (-13%) and Utilities (-13.4%).

Positive returns were fund in bonds, particularly US Treasuries, which investors flocked to for safety.  US Treasuries were up 8.2% while the Barclays US Aggregate Bond index was up 3.2%.  The Barclays Municipal Bond index was down 0.6%.

During the 1st quarter of 2020 we saw the Federal reserve make three larger moves to help the economy.  First, they started buying assets in the open market to help support the markets.   Second, they lowered interest rates to stimulate growth.  Finally, the Fed lowered the reserve requirements for lending institutions therefore encouraging them to make more loans.

We saw the 30-year mortgage rate fell to 3.3%, down from 4.2% a year ago.  The unemployment rate increased to 4.4% and is expected to increase going forward.  US initial claims for unemployment insurance skyrocketed to over 6.2 million.

US retail sales cratered.   US Clothing and Accessories were down 50.5%.  US Auto and Other Vehicle Sales were down 27.1%.  US Food Services and Drinking Places were down 26.5%.  US Furniture and Home Furnishings were down 26.8%.  US Sporting Goods, Hobby, Book and Music Stores were down 23.3%.  One of the only bright spots were US Grocery Stores which were up 27%.  Sales at US General Merchandise Stores were up 6.4% and US Health and Personal Care Stores were up 4.3% continuing the trend of essential vs. non-essential retail stores.

Some of the hardest hit industries were the “BEACH” industries:

Booking Companies

-35.8%

Entertainment & Live Events Companies

-51.8%

Airlines

-56.0%

Cruise Lines & Casinos

-56.2%

Hotels & Resorts

-38.8%

 

At the time of this post, the stock market has started to rebound.  However, there is still a lot of uncertainty surrounding how the world will handle and respond to the reopening the economy.