The Markets saw a sea of red last week as broad selling impacted every asset class. Of the Major Markets, the greatest losses were seen in the more concentrated Dow Jones Industrial Average. Surprisingly, after weeks of underperformance, the MSCI Emerging Market Index was the best of the worst as it only lost 7.26% last week.
What is most remarkable about this selloff is that the S&P 500 traded to new all-time highs of 3380.45 just a week earlier on Thursday the 20th. This became the fastest 10% market correction in the history of the S&P 500. It also marked the largest weekly decline since the financial crisis of 2008.
While the drop in the market wasn’t the largest single day drop on record in percentage terms, the Dow Jones Industrial Average experienced its largest single day point drop on Thursday.
By the end of the week, all five of the major markets sit negative for the year with the Dow Jones reflecting a double-digit loss.
But to put things in perspective, the S&P 500 closed at roughly the same level that it did back in April of last year and more recently in October. While these events can feel catastrophic in the moment, at least for the S&P 500, it has fallen back to a level that it spent much of last year trading around.
The selloff was largely caused by further unsettling news around the global supply chains of companies that span from the tech space to consumer goods. Every sector was hit last week with only the communication Services sector managing to hold off from giving back over 10% last week.
Meanwhile, Energy experienced the largest pullback. The drop in Energy was fueled by falling oil prices as the S&P GSCI Crude Oil Index fell 16.12% last week. As the coronavirus continues its spread around the globe, oil demand has fallen precipitously due to both government-imposed travel bans as well as self-imposed travel limitations by the general population.
The flight out of equities led to demand for treasuries and consequently lower rates. By the end of the week, the 10-year closed at 1.13%. This reflects a 36-basis point drop in a week and a 79-basis point drop year to date.
“P&G Expects Coronavirus Outbreak to Hit Current-Quarter Revenue, Profit.” Reuters, Thomson Reuters, 20 Feb. 2020, www.reuters.com/article/us-china-health-procter-gamble/pg-expects-coronavirus-outbreak-to-hit-current-quarter-revenue-profit-idUSKBN20E279.
The S&P 500® Index is a capitalization index of 500 stock-designed to measure performance of the broad domestic economy through changes in the aggregate market value of stock representing all major industries.
The Dow Jones Industrial Average® (The Dow®), is a price-weighted measure of 30 U.S. blue-chip companies. The index covers all industries except transportation and utilities.
The NASDAQ Composite Index measures all NASDAQ domestic and international based common type stocks listed on The NASDAQ Stock Market. Today the NASDAQ Composite includes over 2,500 companies, more than most other stock market indexes. Because it is so broad-based, the Composite is one of the most widely followed and quoted major market indexes
The MSCI World Index, which is part of The Modern Index Strategy, is a broad global equity benchmark that represents large and mid-cap equity performance across 23 developed markets countries. It covers approximately 85% of the free float-adjusted market capitalization in each country and MSCI World benchmark does not offer exposure to emerging markets.
The MSCI Emerging Markets (EM) Index is designed to represent the performance of large- and mid-cap securities in 24 Emerging Markets countries of the Americas, Europe, the Middle East, Africa and Asia. As of December 2017 it had more than 830 constituents and covered approximately 85% of the free float-adjusted market capitalization in each country.
The S&P GSCI Crude Oil index provides investors with a reliable and publicly available benchmark for investment performance in the crude oil market.
Companies in the S&P 500 Sector Indices are classified based on the Global Industry Classification Standard (GICS®).