Equities markets had a huge bounce on Wednesday following the results of Super Tuesday primary elections. As normal for incumbents, Trump is the uncontested Republican nominee. However, the Democrats are divided between the moderate “establishment” (Biden, Buttigieg, Bloomberg, Klobuchar) v. the more progressive “fringe” candidates (Sanders, Warren). On the eve of Super Tuesday, Sanders stood above all other Democratic candidates with a 21% chance winning the 2020 election (Biden was next at 14%), and markets have taken note of this likelihood.
Things changed overnight as the Democratic Party establishment coalesced around a Biden nomination, with both Buttigieg and Klobuchar withdrawing to throw their support behind Biden. This triggered a reversal of fortunes, with Biden the clear Democratic frontrunner and Sanders as the underdog going forward. Biden is seen as a status quo candidate, not expected push the bold (and costly) Sanders centerpiece items, such as healthcare and higher education for all. As the hopes of a Sanders nomination evaporated, so too did the uncertainty of such a schismatic candidate. As a result, Wednesday was a +4% day for the S&P 500.
Last week was a minor reprieve for markets with the S&P 500 actually finishing up 18 points or 0.65%. Unfortunately for equity markets, there were still several down days from continued concerns of Covid-19. There are now over 111,000 confirmed cases with 3,892 confirmed deaths. The Fed did not wait until the March 18 meeting for a rate decision, instead announcing on Tuesday to cut interest rates by 0.5% ahead of market expectations. The press release notes that although US economic fundamentals remain strong, the coronavirus poses “evolving risks” to the economy.
Other measures continue to indicate an environment of taking risk off the table. The 10-year Treasury yield continued to set new lows, falling at an astonishing rate to 0.74% as equity markets whipsawed last week. Oil continued downward on tempered demand as companies such as airlines and cruise ships face a swath of cancellations from concerned travelers. On top of wavering demand, OPEC expressed little concern of restricting supply at the latest meeting in Vienna over the weekend. OPEC member Saudi Arabia instead announced an increase of oil production in what is seen as an attempt at driving out Russian competition. Oil fell over 30% this morning to below $28, a range not seen since February 2016 and the 2nd-largest one-day drop in its history. Gold also had a +5% week, up to $1,673.
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S&P Composite 1500® Index combines three leading indices, the S&P 500®, the S&P MidCap 400®, and the S&P SmallCap 600® to cover approximately 90% of the US market capitalization. It is designed for investors seeking to replicate the performance of the US equity market or benchmark against a representative universe of tradable stocks. Investors cannot invest in an index.
MSCI ACWI ex USA Index captures large and mid-cap representation across 22 of 23 Developed Markets (DM) countries (excluding the US) and 23 Emerging Markets (EM) countries. With 1,859 constituents, the index covers approximately 85% of the global equity opportunity set outside the US. Investors cannot invest in an index.
Bloomberg Barclays Global Aggregate ex-USD Index is a measure of global investment grade debt from 24 local currency markets. This multi- currency benchmark includes treasury, government-related, corporate and securitized fixed-rate bonds from both developed and emerging markets issuers. Investors cannot invest in an index.
Bloomberg Barclays High Yield Corporate Bond Index measures the USD-denominated, high yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody's, Fitch and S&P is Ba1/BB+/BB+ or below. Bonds from issuers with an emerging markets country of risk, based on Barclays EM country definition, are excluded. Investors cannot invest in an index.
Bloomberg Commodity Indices are a family of ﬁnancial benchmarks designed to provide liquid and diversiﬁed exposure to physical commodities via futures contracts. The Bloomberg Commodity Index (BCOM) is a highly liquid and diversiﬁed benchmark for commodity investments.
Bloomberg Barclays US Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed- rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM pass- through), ABS and CMBS (agency and non-agency). Provided the necessary inclusion rules are met, US Aggregate eligible securities also contribute to the multi-currency Global Aggregate Index and the US universal Index, which includes high yield and emerging markets debt. The US Aggregate Index was created in 1986 with history backfilled to January 1, 1976. Investors cannot invest in an index.
Bloomberg Barclays 1-10 Year US Government Inflation-Linked Bond Index tracks the 1-10-year inflation protected sector of the United States Treasury market. Investors cannot invest in an index.
Bloomberg Barclays US Treasury 1-3 Year Index measures the performance of public obligations of the US Treasury with maturities of 1-3 years, including securities roll up to the US Aggregate, US Universal, and Global Aggregate Indices. Investors cannot invest in an index.
Bloomberg Barclays US Treasury Bellwethers 3 Month Index is an unmanaged index representing the on-the-run (most recently auctioned) US Treasury bill with 3 months’ maturity. Investors cannot invest in an index.