News, analysis and comment
By Logan Robertson and Thomas J. Connelly, CFA, CFP®
March 24, 2020
Equity markets around the posted a sharp recovery from yesterday’s declines. The Dow Jones Industrial Average finished up 11.3% (best day since 1933), the S&P 500 Index was up 9.5%, and major European indices all closed up more than 7%. Korean and Japanese markets performed similarly, while the Shanghai Composite posted a more modest +2.34%. The S&P 500 remains down 24.1% year-to-date. The VIX dropped slightly to 60.7.
Bond yields are largely unchanged from yesterday. The US 10 Year Treasury yields 0.823%. Emerging Market Sovereign bond yields remain elevated as the flow of nervous investor money into US dollars continues.
The rally in gold from yesterday continued today, soaring another 5% to $1,630/oz. The precious metal has now outperformed the S&P 500 over the last five years; the spot price of gold has risen 36.5%, and SPY (S&P 500 ETF) has returned a cumulative 28.9%, since March 24, 2015.
Trouble continued in the Mortgage REIT market today as firms like IVR and NYMT had their value cut by 52.8% and 47.1% respectively. Concerns over liquidity, missed margin calls, delayed dividends, and falling asset values have driven the market value of many Mortgage REITs well below book value and dividend yields to recent highs.
The Federal Reserve has remained mostly quiet since yesterday’s announcement of “extensive new measures to support the economy.” Those measures included opening multiple credit facilities aimed at relieving funding stress on businesses, municipalities, and individuals, as well as massive asset purchases.
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