There’s Blood in the Street
The Stock Market has continued its decline, notching down more than -30% in the first three months of 2020. We will continue to take defensive actions if the market continues to decline but look forward to the point this bottoms and presents us with a buying opportunity of likely historic proportions. There is blood in the streets, this is when we are supposed to be buying. That said, we have never dealt with a pandemic like this in modern times and it remains to be seen how this will play out.
The Bond Market has also seen near historical volatility of late. The Federal Reserve moved forcefully to shore up the bond market this morning, stating that they would print as many dollars as is necessary to keep debt liquid. For the first time in history they will be buying not only Federal Bonds but also Corporate and Municipals. Not surprisingly, the bonds market was up almost 2.5% today, which is a big move in bonds that average 3% income over a year.
We remember that the bond market saw sharp declines in 2008, down -15% in September and early October, close to what we have seen this month. Once the Federal Reserve backstopped everything, with less forceful action than they are doing now, bonds were 90% recovered within 2 weeks, fully recovered within 3 months. It took the stock market 3 years to fully recover. Thus try and stay the course on bonds, the Fed has a good track record of being able to stabilize the market and they are working very hard right now.