Market Highlights 1Q 2020

The S&P 500 Index started off with a continuation of its upward trajectory which abruptly reversed in February with the global outbreak of the Covid-19 pandemic followed by stay-at-home orders around the world. At the same time, talks between Saudi Arabia and Russia broke down resulting in a flood of supply in the oil market, pushing down prices to the $20s, their lowest levels since 2016 and a decline of 66% Quarter-over-Quarter (QoQ). The market had its fastest decline in history taking 22-days to hit the low on March 23rd closing at 2,237 reversing all the gains of the previous three years. The market moved higher in the final weeks of the quarter for a total return of -19.6%. March continued to absorb more bad news as initial jobless claims for the period ending March 28th hit 6.6M up from 3.3M the week before with most analysts expecting a real GDP decline of 50% QoQ in 2Q. The Fed responded by cutting rates to zero and pledging to purchase assets from Treasurys to corporate-bond funds to municipal debt. Meanwhile the government has already passed three stimulus packages with the most recent package known as the CAREs act, providing $2.2T of stimulus with a fourth stimulus package already being discussed. Additional stimulus packages and Central Bank liquidity injections were announced around the world for a total of $12.4T in global monetary and fiscal stimulus funding.

The Dow Jones Industrial Average and the S&P500 recorded their worst first quarter performance in history with a return of -22.7% and -19.6%, respectively, followed by the Nasdaq Composite declining -13.9%. All eleven sectors in the S&P 500 posted negative returns during the period with Energy, Industrials and Materials posting the largest declines with returns of -50.5%, -27.1%, and -26.1%, respectively. Large-cap stocks outperformed mid-cap stocks, which beat small-cap names but all were negative for the quarter. Specifically, the Russell 1000 Index’s 20.2% decline did better than the Russell Mid-Cap Index and the Russell 2000 Index which posted losses of 27.1% and 30.6%, respectively for the quarter. Growth stocks continued to beat their value counterparts, as the Russell 1000 Growth Index fell 14.1% compared to the 26.7% decline of the Russell 1000 Value Index over the same period. Bonds beat all equity markets with long-dated US Treasuries soaring with a return of 21.9%. US corporates did not fare as well but was still in positive territory with the Barclays Aggregate returning 3.15%. The US Dollar Index gained 2.8% for the quarter while gold gained 4.0%. Oil and Commodities took a hit with declines of 66.5% and 23.5%, respectively. Bitcoin followed equities lower declining 9.5% over the period.

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Bill Miller's 1Q 2020 Market Letter

1Q 2020 Market Infographic

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The views expressed in this commentary reflect those of Miller Value Partners analyst(s) as of the date of the commentary. Any views are subject to change at any time based on market or other conditions, and Miller Value Partners disclaims any responsibility to update such views. The information presented should not be considered a recommendation to purchase or sell any security and should not be relied upon as investment advice. It should not be assumed that any purchase or sale decisions will be profitable or will equal the performance of any security mentioned. Past performance is no guarantee of future results.

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