Tradition Asset Management

129 Summit Avenue

Summit, NJ  07901


April 2020
Market Update
(all values as of 06.28.2024)

Stock Indices:

Dow Jones 39,118
S&P 500 5,460
Nasdaq 17,732

Bond Sector Yields:

2 Yr Treasury 4.71%
10 Yr Treasury 4.36%
10 Yr Municipal 2.86%
High Yield 7.58%

YTD Market Returns:

Dow Jones 3.79%
S&P 500 14.48%
Nasdaq 18.13%
MSCI-Europe 3.72%
MSCI-Pacific 3.05%
MSCI-Emg Mkt 6.11%
US Agg Bond -0.71%
US Corp Bond -0.49%
US Gov’t Bond -0.68%

Commodity Prices:

Gold 2,336
Silver 29.43
Oil (WTI) 81.46


Dollar / Euro 1.06
Dollar / Pound 1.26
Yen / Dollar 160.56
Canadian /Dollar 0.73

Macro Overview – With the coronavirus continuing to wreak havoc on markets and economies worldwide, governments and businesses are confronting an unprecedented environment. In response, massive fiscal and monetary stimulus efforts put into motion by the administration and the Federal Reserve (the “Fed”) are expected to provide unparalleled economic stimulus.

The World Health Organization (“WHO”) declared the COVID-19 virus a pandemic on March 11th, sending global equities further down and ending the longest bull run in U.S. history. The 20% plus decline for all three major equity indices, from record highs set in mid-February, qualified the rapid descent as an end to the bull market that began in March 2009. The International Monetary Fund (“IMF”) determined that the global economy has fallen into a recession, due to disrupted global supply chains and a drop in commerce induced by the virus outbreak. Economists believe that international markets may eventually rebound should governments around the world effectively mitigate contamination.

The $2.2 trillion stimulus plan passed by Congress, known as the Cares Act, was the largest in U.S. history, providing critical funds to small business owners and individuals nationwide. Massive federal borrowing will fund the program in the form of U.S. government debt issuance expected to exceed $2 trillion in short-term Treasury bills this year alone. It is too soon to determine as to what the overall impact will be to the multitude of industries and companies over the next few months. Globalization is in question as global commerce has dwindled due to supply chain constraints, along with varying rules and restrictions among countries involving cross-border transactions.

The Fed took unprecedented steps to stabilize bond markets and maintain liquidity following dramatic volatility amid continued uncertainty. The Fed committed to spend nearly a trillion dollars for the purchase of Treasury bonds, municipal bonds, corporate bonds and agency bonds in order to support the bond markets. The purchase strategy is reminiscent of Quantitative Easing (Q.E.), which was initially utilized during the 2008-2009 financial crisis. As recession has become more of a probability, some economists are projecting a V-shaped recessionary environment, where asset prices may bounce back sooner rather than later in the second half of the year. Historically, the U.S. has never entered a recession with interest rates as low as they are now. The Treasury Department and the IRS announced an extension of the tax filing deadline from April 15, 2020 to July 15, 2020. Taxpayers will be able to defer tax payments until July 15th, without any penalties and interest. The deferment applies to all taxpayers, including individuals, businesses, estates, and corporations.

A historical spike in unemployment claims of nearly 10 million was brought about by mass layoffs as governmental entities mandated business closures and restrictions across the country. The immense jump in unemployment claims over just two weeks may worsen, yet expected to be buffeted by funds targeted for the unemployed as a result of the $2.2 trillion stimulus plan. The plan also encourages small businesses to re-hire employees as conditions warrant. Personal and business bankruptcies are expected to rise dramatically as a result of government mandated shutdowns, which have halted incomes for employers and employees across the country. (Sources: IMF, WHO, Fed, Treasury, IRS, Dept. of Labor) Market Update (Source: Bloomberg)

The IRS has extended the tax filing and payment deadline

IRS Tax Filing Deadline Extended To July 15th – Tax Policy

The IRS has extended the tax filing and payment deadline from April 15, 2020 to July 15, 2020. The new extension deadline applies to individuals, fiduciaries (estate and trusts), small business owners, and corporations. Individuals do not need to be infected by the coronavirus or subject to quarantine in order to have the July 15th extension apply.

Taxpayers are also able to defer federal income tax payments and quarterly estimates due on April 15, 2020, to July 15, 2020, without penalties and interest, regardless of the amount owed. The deferment applies to all taxpayers, including individuals, trusts and estates, corporations and other non-corporate tax filers in addition to those who pay self-employment tax. For individuals contributing to an IRA or IRA Roth, an HSA or MSA, the deadline of July 15th applies.

There is no form required or need to contact the IRS in order to have the July 15 deadline honored. The traditional tax filing date for extensions of October 15th remains the same. The IRS does urge taxpayers due a tax refund to apply sooner than the deadline in order to receive a refund check sooner. (Source: IRS;, TaxPolicyCenter)


Nearly 10 Million Claim Unemployment In Just Two Weeks – Labor Market Update

The sudden loss of jobs and mass layoffs by businesses nationwide has brought about the single largest increase in unemployment claims in the country’s history. What should have been another average week for unemployment claims of roughy 243,000 based over the past five years, turned into 3.28 million people applying for unemployment for the week ending March 21st, and another 6.6 million for the week ending March 28th.

Unemployment claims and the unemployment rate is expected to only increase over the upcoming reporting periods. Optimistically, the 50-year low of 3.5% for unemployment is a buffer for the anticipated increase in unemployment.

There are varying estimates as to how high the unemployment rate may go as a result of the virus outbreak and its economic aftermath. Some economists project 25% unemployment, which was last seen during the Great Depression, while others expect 10-15%. Regardless of how high unemployment heads, many believe that it will be short-lived as companies and small businesses are encouraged and financially incentivized by the Cares Act to re-hire employees.

The Federal Reserve is preparing for a worst case scenario, estimating a possible 30% unemployment rate as noted by St Louis Fed President James Bullard. The dismal estimates allow the Fed to aggressively pump massive amounts of liquidity into the U.S. financial system and the economy in the form of buying bonds and maintaining ultra low interest rates until employment conditions improve.

The concern is that as unemployment rapidly increases, consumer confidence may fall to levels not allowing for a viable economic recovery. Roughly 2/3s of the country’s GDP is hinged on consumer expenditures. (Sources: Dept.of Labor, Federal Reserve)


Equity markets experienced volatility in March not seen since the 1930s

Equities End Eleven Year Bull Market Run – Domestic Stock Market Overview

Equity markets experienced volatility in March not seen since the 1930s, with daily declines so sharp that rarely-used mechanisms to halt trading were activated by the exchanges on multiple occasions. The S&P 500 Index saw an average daily change of 5.2% in March, the most extreme volatility since November 1929.

Stocks fell into bear market territory and then out of it in technically the shortest bear market in history. The last time the Dow Jones Index went from its bear market low to a bull market in only three days was in October 1931. Stocks had their worst quarter in years, with the S&P 500 Index losing 20% for the quarter ending March 31st, and the Dow Jones Industrial Index surrendering 23%. The bull market that began in March 2009, officially came to an end in March, after an 11-year run. The Dow Jones Industrial Index went from its high on Feb 12th to bear market territory in only 19 trading sessions.

With massive stimulus plans now in place, the market’s recovery has become contingent on the virus timeline for containment and effective testing. Analysts expect that once the virus outbreak has abated, any remaining stimulus efforts by the administration and the Fed will continue to act as a stimulus for the markets.

Signs of resilience at the end of March suggest that equities may regain their footing sometime soon. Overall valuations on stocks have fallen to levels that warrant accumulation of certain companies and industries. Eyes will be on earnings and quarterly performance releases over the next few weeks, as analysts determine how much of an impact the pandemic has thus had. (Sources: S&P, Dow Jones, Bloomberg)

Oil Has Worst Month In Years – Energy Sector Update

Extreme volatility appeared in the oil markets as prices fell to their lowest levels since 2002, tumbling to $20.37 (WTI) in mid-March, then rebounding 25% on March 19th, the largest one day rise in oil’s history. Prices collapsed when Russia and Saudi Arabia signaled an increase in production as demand fell worldwide due to the virus outbreak. Saudi Arabia and Russia engaged into an oil price war, which also contributed to oil hitting multi-year lows. In an aggressive attempt to capture market share from Russia, Saudi Arabia dropped their oil prices and ramped up supply to over 12 million barrels a day, 2 million more than previous supply levels. The newly launched oil price war cratered global stock markets with the largest one day decline since 2008.The sudden and swift decline in oil prices has intensified profitability issues for U.S. producers, who have seen margins fall as prices have leveled off over the past few months. Sudden declines in global demand for oil due to the virus outbreak have also added to downward pressures.

At the center of the production clash between Russia and Saudi Arabia is the U.S. oil industry, whose furious technical advancements and production capabilities have grabbed international market share away from both Russia and Saudi Arabia. Many oil industry analysts believe that both Russia and Saudi Arabia are trying to dislodge and eliminate U.S. producers by inhibiting their margins and drive them out of business. Fortunately for U.S. oil drillers and producers, a resilient and responsive strategy has allowed them to combat price manipulation efforts numerous times over the past few years. Crude oil markets were in contango in March, a phenomenon when oil price futures are priced higher than current prices, thus enticing oil producers to store oil obtained at current prices for sale in the future at higher prices. The abundance of crude oil supplies globally has also led to a shortage of storage, which is necessary for oil producers in order to continue production. (Sources: U.S. Energy Information Administration)

Credit markets experienced dislocation in March

Massive Stimulus Efforts Bring Yields To Historic Lows – Fixed Income Update

The Federal Reserve announced a reintroduction of its Quantitative Easing (QE) program to now include corporate bonds in addition to government agency and Treasury bonds. The program essentially entails the buying of an unlimited amount of bonds in the open market, thus stabilizing prices and volatile trading caused by a dislocation in the market. Intervention in the corporate bond market is an unprecedented action for the Federal Reserve, in addition to initiating programs to ensure sufficient access to credit for public and private entities such as cities, counties, municipalities, as well as corporations.

The incredible demand for short-term government bonds outstripped the supply of Treasury bills issued by the U.S. Treasury in mid-March. When demand exceeds supply by such an extent, short-term rates drop, in turn sending money market rates lower. Assets have been pouring into money market funds as market conditions created a rush away from volatility.

The Fed reduced its key lending rate to 0%-0.25% in March and announced that it would begin buying $700 billion in Treasury and mortgage bonds immediately. The Federal Reserve announced that it would also be buying selected corporate bonds and municipal securities in the open market in order to help stabilize broad fixed income sectors. Buying corporate and municipal bonds deviates from traditional Fed policies as a result of the current extraordinary conditions.

Credit rating firm Fitch, mentioned that its AAA credit rating on U.S. government debt is at risk of being downgraded due to the spontaneous rise in the country’s deficit and debt level brought upon by the virus crisis. Lower credit ratings for government debt tend to eventually make it more costly for a nation to borrow funds.

Credit markets also experienced dislocation in March, a term used to describe that bonds aren’t trading as they usually do, exhibiting erratic valuations and liquidity constraints.

Some analysts view the increase in long-term Treasury yields as an indicator that economic growth will eventually return, albeit, with some inflationary pressures hinged to it. Other analysts see higher Treasury yields resulting from newly issued government debt along with the already excessive fiscal deficit. (Sources: Federal Reserve, Treasury, Fitch)


Market Returns: All data is indicative of total return which includes capital gain/loss and reinvested dividends for noted period. Index data sources; MSCI, DJ-UBSCI, WTI, IDC, S&P. The information provided is believed to be reliable, but its accuracy or completeness is not warranted. This material is not intended as an offer or solicitation for the purchase or sale of any stock, bond, mutual fund, or any other financial instrument. The views and strategies discussed herein may not be appropriate and/or suitable for all investors. This material is meant solely for informational purposes, and is not intended to suffice as any type of accounting, legal, tax, or estate planning advice. Any and all forecasts mentioned are for illustrative purposes only and should not be interpreted as investment recommendations. Nothing herein should be construed as an investment recommendation or as legal, tax, investment or accounting advice.