Monday, March 9, 2020

Oil and Coronavirus Drive Rapid Readjustment in Asset Values

Monday, March 9, 2020 - Markets are rapidly moving this morning as oil prices drop 20% to mid $30s and all equity prices plummet. U.S. Futures price halts are triggered. The 10 Year Treasury Yield drops below .4%. The U.S. appears to be heading toward negative interest rates.

While concern of the economic fallout of the Coronavirus drove markets last week, the breakdown of  Russian and Saudi cooperation in managing oil supplies and prices on Friday creates a new reality in the Middle East and Oil Geopolitics. As of now, “Cash is King.”

While unbelievable, U.S. markets closed higher last week with the S&P 500 finishing up .61% and the Nasdaq Composite .10%. The broad market as measured by the S&P 500 closed the week at 2,972.37. The NASDAQ Composite closed at 8575.62. Both indexes ended the week largely flat despite volatility of historic proportions. Markets across Asia dropped approximately 5% while European markets recovered to roughly minus 5% after initial drops of 8.5%.

This is a developing crisis on the scale of 2008. Expect emergency Central Bank Rate Cuts, as well as, preparations for sector bailouts and large fiscal spending plan. These efforts, however, will be stymied by supply chain bottlenecks and public fear of the Coronavirus. Recession across the globe is likely.  Expect dislocations in political regimes.

Investors should take heed of the underlying securities in high yield ETFs and money market funds as credit markets should be expected to freeze up. Get ready for a roller-coaster week thanks to Mr. Putin!

All of this creates opportunities for traders and active investors who can use ETFs to take advantage of real-time market volatility – both up and down! 

To take advantage of this, we suggest looking at our ETFG Weekly Select List. To best support the ETF selection process, The ETFG Weekly Select List highlights the 5 most highly rated ETFs per Sector, Geographic Region and Strategy as ranked by the ETFG Quant model.

We suggest keeping a mindful eye on tools like our Select List and Risk and Reward Ratings that can be used to evaluate the vast set of opportunities in the ETF marketplace. Today’s market realities require a new approach to macro investing, one in which individual investors now have access to tools via ETPs to customize risk and return profiles in their portfolios.

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