An Outstanding Historical Perspective

Rather than dwell on the obvious themes that we are being bombarded with by financial media, and which tend to fuel near desperation on the part of investors, please consider some historical data points that justify a more constructive outlook this morning. Scott Maidel’s VIX-centric chart below is a great example.

Scott Maidel’s chart above should provide a degree of measured perspective for weary, or dare I say terrified, investors. Of the thousands of folks I have worked with over the years in financial markets, Scott ranks at the top for his ability to glean unique and valuable insights from a storm of data. From PIMCO and Russell Investments, to First Quadrant, Scott has been an outstanding source of perspective.


Another historical perspective that allows for a measured but constructive outlook this morning comes from examining how markets tend to follow through to yearend after a Q1 equity market meltdown of more than 10%.

3/31/1933 S&P 500 lost 15.46% and posted a gain of 70.43% over the ensuing 3 quarters.
3/29/1935 S&P 500 lost 11.05% and posted a gain of 58.93% over the ensuing 3 quarters.
3/31/1938 S&P 500 lost 19.43% and posted a gain of 54.59% over the ensuing 3 quarters.
3/31/1939 S&P 500 lost 16.44% and posted a gain of 13.48% over the ensuing 3 quarters.
3/30/2001 S&P 500 lost 12.11% and posted a loss of 1.06% over the ensuing 3 quarters.
3/31/2009 S&P 500 lost 11.67% and posted a gain of 39.76% over the ensuing 3 quarters.
3/31/2020 S&P 500 lost 20.00%…

This statistical abstract does not guarantee that markets will post gains through the end of the year. It does, however, provide some historical perspective. Additionally, though there are no guarantees here, I do think it safe to say the we should be nearing a meaningful degree of relative stabilization. My hope is that that stabilization allows for investors to re-engage markets from the long side.

Last week’s economic calendar highlights:

The consumer confidence reading for March was released Tuesday. The results were down sharply from the previous reading. For March, the reading was 120. February’s reading was revised to 132.6. Econoday consensus was calling for a more dire 110. The ISM Mfg. Index for March was 49.1 – surprisingly strong given the biblical unwind that has hit every vertical of the U.S. and global economy.

The March Employment Report was stunning and significantly worse that consensus was calling for. Nonfarm payrolls M/M dropped 701,000. The unemployment rate jumped to 4.4% from 3.5%. The balance of the report was equally as unsettling. Unfortunately, in coming months, these figures will likely look tame in comparison.

This week’s economic calendar highlights:

On Wednesday the EIA Petroleum Status Report for the week ending 4/3 hits the tape at 11:30 am. The previous week’s report reflected swelling inventory levels despite the historic route that has materialized in global crude prices over the past month. Crude inventories rose 13.8 M barrels. Gasoline inventories rose 7.5 M barrels. Distillate inventories slipped by 2.2 M barrels. Also on Wednesday, the FOMC minutes from the meeting that was held three weeks ago are released.

Weekly jobless claims figures for the week ending 4/4 are released on Thursday morning at 8:30 am. The jobless claims release is always the first release of the day, and tends to set the tone for the balance of the day and end of week. New Claims – Level released last week were 6,648 K. Econoday consensus for this week ranges from 3,000K to nearly 8,000 K. The Producer Price Index – Final Demand for March is released on Thursday morning as well. Econoday consensus (M/M and Y/Y) is expected to provide further confirmation that prices continue to slacken at the producer level. On a M/M basis, PPI-FD is expected to be -0.3%. On a Y/Y basis, the reading is expected to fall sharply to 0.4% from 1.3%.

(Chart: Courtesy Scott Maidel, CFA, FRM)

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