April Market Commentary

In April US stocks posted their best month since 1987 as stocks rebounded off their March lows supported by interventions from the Federal Government, the Federal Reserve, and optimism over the easing of lockdowns.  A new $484 billion deal was reached in Congress to aid small businesses and hospitals.  The majority of the funds will go towards replenishing the Paycheck Protection Plan and the Economic Injury and Disaster Loan funds that were quickly loaned out from the CARES Act.  Economic news started to reflect the impact of the shutdown of the economy.  There were 701,000 jobs cut in March and the unemployment rate moved from 3.5% in February to 4.4% in March, however, due to the timing of the reading the results don’t reflect the full extent of recent job cuts.  Since mid-March, more than 30 million people have filed for unemployment benefits.  US retail sales fell a record of 8.7% in March.  Factory and business activity and auto sales all saw a significant contraction in March.  First quarter GDP posted its fastest decline since the Financial Crisis falling 4.8%, more than projected.  For the month, US stocks surged 13.24%, but remain down 10.42% for the year to date.

Foreign stocks bounced back as well in April driven by monetary and fiscal stimulus measures as well as an easing of lockdowns.  To fight the impact of the virus on Europe, the EU reached an agreement on a $590 billion coronavirus relief bill.  The European Central Bank announced it would buy $820 billion of European government bonds.  These steps were taken as the lockdown of the region was showing its effects.  Factory activity and the service sector plunged in Europe and the Eurozone posted its largest quarterly decline of GDP ever, falling 14.4%.  The Bank of Japan said it would nearly triple its holdings of corporate debt to help support the Japanese economy.  The US, Saudi Arabia, and Russia reached an agreement for the 23 major oil producing countries around the world to cut oil production by 9.7 million barrels a day to help support the price of oil.  However, oil experienced extreme volatility over the month with the current month’s futures contract falling below zero at one point during the month before oil ended down 8% at $18.84 a barrel.  China contracted 6.8% in the first quarter, the first ever decline in growth for the country since the data was first tracked in 1992.  However, the decline was better than the 8.3% projected as business activity improved and the bank of China implemented additional stimulus measures.    Emerging markets have topped developed markets over the month and year to date.  Foreign stocks jumped 7.67% in April, but have declined 17.47% over the year to date.

Bonds climbed in April as interest rates edged down and Fed intervention helped ease volatility.  The Fed announced a new $2.3 trillion loan program supporting small and midsize businesses, municipalities, and riskier types of debt that had been previously excluded.  They also said they were prepared to expand that program if needed to prevent long lasting damage to the US economy.  After their meeting at the end of April, the Fed stated that it will use “its full range of tools to support the US economy in this challenging time.” They also called on the federal government to take on additional stimulus actions.  The 10-year Treasury yield edged down slightly over the month to end at 0.64%, down from 0.70% to start the month.  For the month, credit bonds were the top performer with longer term maturities performing the best. Over the year to date, it was US government bonds leading the way with longer maturities outpacing.  Muni bonds were down over the month over concerns of how the lockdowns would impact state and local revenues.  In April, the US bond market rose 1.41% and has gained 3.84% over the year.