Market Update as of April 26, 2020

With heightened market volatility and significant news flow, Ellwood wanted to share brief, high-level observations on the investment environment. If you have any questions, please do not hesitate to reach out to your consulting team.

Our next update will be published in mid-May. We wish everyone well and good health.

Please contact your Ellwood consultant with any questions or if you would like to discuss in more detail. We wish everyone well and good health.

To read all of Ellwood's recent coverage during the global pandemic, click here.

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Central Banks
The U.S. central bank continued ramping up its balance sheet, with total assets ending the week at $6.6 trillion. The Fed’s weekly purchases of Treasury and mortgage-backed securities ramped up quickly during the end of March but has since decelerated over the first three weeks of April.1

Fiscal Stimulus
The U.S. approved a fourth stimulus package totaling $484 billion, including $384 billion expansion of the Small Business Administration’s lending programs (including the Paycheck Protection Program) and $100 billion to support healthcare providers and COVID-19 testing.2

Economic Data
U.S. initial unemployment claims reached 26.5 million over the five-week period ending April 18, although the pace has decelerated each week since the 6.9 million peak reached over the week ending March 28.3

Equities
The equity market held its gains over the past couple weeks as volatility continues to decrease from the historic levels witnessed in March. As of April 24, the S&P 500 remains 16% below its February high; however, the market has rallied +27% from its March lows. Often times market reversals such as these result in a change of market leadership; however, quality and momentum factors have continued their relative outperformance, while value and small cap have lagged.4

Credit
U.S. investment grade corporate spreads ended the week at 2.09%, representing a 63 basis point decline for the month of April, and significantly below the March 23 peak of 3.73%. High yield bond spreads widened over the past week but ended at 7.75%—105 basis points below the start of April and well below their 11.0% peak in March.5

Cross-Asset
WTI Crude’s collapse (-26% month-to-date) was the story of April, but interestingly both energy equities (+19% month-to-date) and MLPs (+35% month-to-date) have endured quite strongly. The broad upswing in U.S. equities (+10% month-to-date) was consistent with credit sectors rise throughout the month.6 

Currencies
While the U.S. dollar has been generally strong against foreign currencies in 2020 (especially economies with heavy oil exposure), performance is mixed for April. The U.S. dollar has bounced around throughout the month, appreciating versus European and Latin American currencies while depreciating against the Australian dollar, Canadian dollar, and Asian currencies.7

Commercial Paper
Commercial paper spreads continued to narrow, with AA nonfinancial and asset-backed spreads ending at 22 basis points and 30 basis points, respectively. At the beginning of 2020, spreads were at 6 basis points and 15 basis points, respectively.8

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1. Board of Governors of the Federal Reserve System
2. Library of Congress, Congressional Budget Office, The Japan Times https://bit.ly/2W5G3Lf
3. U.S. Department of Labor
4. S&P Dow Jones Indices, MSCI
5. Bloomberg Finance, L.P.
6. Bloomberg Finance, L.P., S&P Dow Jones Indices, Alerian
7. MSCI
8. Board of Governors of the Federal Reserve System, U.S. Department of the Treasury

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The information provided herein is for informational use only and not to be construed as investment advice. Any opinions herein reflect our judgment as of this date and are subject to change. In no way should the information herein be construed as personal recommendations as it does not take into account the particular investment objectives, financial situations, or needs of individual users.

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Information has been obtained from sources believed to be reliable but J.P. Morgan does not warrant its completeness or accuracy. The Index is used with permission. The Index may not be copied, used, or distributed without J.P. Morgan’s prior written approval. Copyright 2020, JPMorgan Chase & Co. All rights reserved.

Alerian MLP Index”, “Alerian MLP Total Return Index”, “AMZ”, and “AMZX” are trademarks of GKD Index Partners d/b/a Alerian (“Alerian”) and their use is granted under a license from Alerian. Alerian does not guarantee the accuracy and/or completeness of the Alerian MLP Index or any data included therein and Alerian shall have no liability for any errors, omissions, interruptions or defects therein. Alerian makes no warranty, express or implied, representations or promises, as to results to be obtained by Licensee, or any other person or entity from the use of the Alerian MLP Index or any data included therein. Alerian makes no express or implied warranties, representations or promises, regarding the originality, merchantability, suitability, or fitness for a particular purpose or use with respect to the Alerian MLP Index or any data included therein. Without limiting any of the foregoing, in no event shall Alerian have any liability for any direct, indirect, special, incidental, punitive, consequential, or other damages (including lost profits), even if notified of the possibility of such damages.

Published April 26, 2020.
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