Weekly COVID-19 Market Webinar - BNY Mellon …...Weekly COVID-19 Market Webinar April 6, 2020...
Transcript of Weekly COVID-19 Market Webinar - BNY Mellon …...Weekly COVID-19 Market Webinar April 6, 2020...
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Weekly COVID-19 Market Webinar
April 6, 2020
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-22.6
-34.8-36.7
-26.4-25.1
3.4
9.0
-15.2
-1.8
-7.1
-34.4
-0.7
-24.2
-40
-35
-30
-25
-20
-15
-10
-5
0
5
10
Perc
ent
Large Cap
U.S. Equities InternationalEquities
Fixed Income Diversifiers
Market Performance Year to Date
Returns as of 4/3/20 unless otherwise noted *Returns as of 04/2/20.Indices used: Large Cap: S&P 500; Mid Cap: S&P 400; Small Cap: Russell 2000; Developed International: MSCI EAFE (Net); Emerging Markets: MSCI EMF; Taxable Fixed Income: Barclays U.S. Aggregate; High Yield Fixed Income: BofA US HY TR; Treasuries: U.S. Treasury Index; Muni: S&P Intermediate High Quality; Hedge: HFRX Equity Hedge Index; Global Real Estate: FTSE EPRA/NAREIT; Commodities: Bloomberg Commodity. TR USD.Sources: Bloomberg L.P. and Morningstar. Past performance is not indicative of future performance.
Mid Cap Small Cap Dev. Emerg. Taxable Treas. High
Yield Munis Hedge* Global REITs
Managed Futures* Commodities
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3 Source: Covidtracking.com. As of 4/5/20.
United States COVID-19 Cases: Mid-April Peak Likely
0
50000
100000
150000
200000
250000
300000
350000C
umul
ativ
e C
ases
U.S. Cumulative Cases
- 5,000
10,000 15,000 20,000 25,000 30,000 35,000 40,000
New
Cas
es
U.S. Daily New Cases
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New Cases in Italy and New York Beginning to Slow
Source: Worldometer.com. As of 4/5/20.
0
1000
2000
3000
4000
5000
6000
7000N
ew C
ases
Italy Daily New Cases
0
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4000
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New York Daily New Cases
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COVID-19’s Impact on the Job Market
Source: Strategas. As of 4/3/20.
-15%-10%-5%0%5%10%15%20%25%-10%
-8%-6%-4%-2%0%2%4%6%8%
'01 '06 '11 '16
Initial Unemployment Claims & GDP
Y/Y Pct Change In Real GDP Quarterly Claims
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China Bounces Back
Source: Strategas. As of 3/31/20.
35
40
45
50
55
60
65
'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
China: ISM Manufacturing PMI(SA, 50+ = Increasing)
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U.S. Fiscal Policy Response
$2 Trillion Stimulus Package. The package includes:
•Individuals: $250B in payments to individuals ($1200 per adult for incomes up to $75,000, $500 per child). ~$250B broader unemployment insurance to replace workers’ lost wages, on average.
•Small Businesses:$377B small business program that will provide affected businesses with loans that they will not need to repay if the proceeds are used to pay wages or other necessities.
•Distressed Sectors: $50B secured lending facility to U.S. passenger and cargo air carriers, and "national security" sectors.
•State Aid: $150B in state aid, to partly offset the effects of COVID-19 on state/local budgets.
•Other spending: $340B, including $130B in funding for hospitals/other health activities, $200B for other federal programs.
•Loans and Loan Guarantees: $500B in capital for loans and loan guarantees, including $454B that the Treasury may use to backstop Fed facilities to provide business credit.
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Federal Reserve’s Initiatives to Help Fixed Income Markets
Source: Strategas. As of 4/6/20.
0
1
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3
4
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'08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21
U.S.: Assets on Federal Reserve Balance
Treasuries
MBS
Other
Dec '08: QE1 Starts
Mar '10: QE1 Ends
Nov '10: QE2 Starts
Sept '11: Op Twist Starts
Jun '12: QE2 Ends
Sept '12:QE3 Starts
Dec '12:Op Twist Ends
Dec '13:Tapering Starts
Oct '14:QE3 Ends Oct '17:
Runoff Starts
Jul '19:Runoff Ends
Oct '19:Purchases
Restart
Mar '20:COVID-19 Stimulus
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What the Bond Market is Signaling?
Source: Lipper. As of 4/1/2020.
-45
-40
-35
-30
-25
-20
-15
-10
-5
0
5
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2/26/20 3/4/20 3/11/20 3/18/20 3/25/20 4/1/20
Fixed Income Flows
U.S. Municipal U.S. Corporate Investment Grade U.S. Corporate High Yield
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Municipal Bond Market Volatility Creating Opportunities
Source: AAA MMD. As of 4/6/2020.
10 Year & 30 Year AAA Municipal Yield Curves
1.63
2.44
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
3/1/2020 3/6/2020 3/11/2020 3/16/2020 3/21/2020 3/26/2020 3/31/2020 4/5/2020
Yiel
d
10-Year AAA Municipal 30-Year AAA Municipal
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Performance Following S&P 500 Worst Quarters
Source: Strategas.
Date Performance +1 Quarter +2 Quarters
3Q 1974 -26.1% 7.9% 31.2%
4Q 1987 -23.2% 4.8% 10.7%
4Q2008 -22.6% -11.7% 1.8%
2Q 1962 -21.3% 2.8% 15.3%
1Q 2020 -20.0% ? ?
2Q 1970 -18.9% 15.8% 26.7%
Q3 2002 -17.6% 7.9% 4.0%
Q3 2001 -15.0% 10.3% 10.2%
Q3 1990 -14.5% 7.9% 22.6%
Q3 2011 -14.3% 11.2% 24.5%
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Interaction Between The Economy And Stock Market
Low unemployment
Falling commodity prices
Inventories high
Profits decreasing
Falling inflation
Capital expenditures decreasing
Falling interest rates (loose $)
High unemployment
Rising commodity prices
Declining inventories
Profits accelerating
Capital expenditures
increasing
Rising inflation
Rising interest rates (tight $)
SELL PROTECT
CHEAPER CAPITAL: BORROW TO BUY OR BUILD M153087
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Asset Class Positioning: Investment Strategy Committee Recommendations
As of 4/1/20.
Underweight Small Underweight Neutral Small
Overweight Overweight
Equity Large Cap Mid Cap Small Cap International Developed Large Cap International Developed Small Cap Emerging Markets Private Equity Private Equity-Real Estate
Fixed Income Treasuries Investment-grade Corporate Tax-exempt High Yield
Diversifiers Real Estate (REITs) Long/Short Hedge Absolute Return Hedge Managed Futures Commodities
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Gradual Recovery to Pre-Crisis Levels
Flattening the COVID-19 Curve Remains Key
Fiscal and Monetary Measures Starting to Heal the Markets
Fixed Income Markets Begin to Stabilize, Opportunities Being Created
Bottoming Process Underway with Volatility to Persist
Active Wealth Critical in a Volatile, More Challenging Return Environment
Key Takeaways
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Q&A
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Thank You
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Disclosure AppendixThis material is provided for illustrative/educational purposes only. All investment strategies referenced in this material come with investment risks, including loss of value and/or loss of anticipated income. Past performance does not guarantee future results. This material is not intended to constitute legal, tax, investment or financial advice. Effort has been made to ensure that the material presented herein is accurate at the time of publication. However, this material is not intended to be a full and exhaustive explanation of the law in any area or of all of the tax, investment or financial options available. The information discussed herein may not be applicable to or appropriate for every investor and should be used only after consultation with professionals who have reviewed your specific situation.
The Bank of New York Mellon, Hong Kong branch is an authorized institution within the meaning of the Banking Ordinance (Cap.155 of the Laws of Hong Kong) and a registered institution (CE No. AIG365) under the Securities and Futures Ordinance (Cap.571 of the Laws of Hong Kong) carrying on Type 1 (dealing in securities), Type 4 (advising on securities) and Type 9 (asset management) regulated activities. The services and products it provides are available only to “professional investors” as defined in the Securities and Futures ordinance of Hong Kong. The Bank of New York Mellon, DIFC Branch (the “Authorised Firm”) is communicating these materials on behalf of The Bank of New York Mellon. The Bank of New York Mellon is a wholly owned subsidiary of The Bank of New York Mellon Corporation. This material is intended for Professional Clients only and no other person should act upon it. The Authorised Firm is regulated by the Dubai Financial Services Authority and is located at Dubai International Financial Centre, The Exchange Building 5 North, Level 6, Room 601, P.O. Box 506723, Dubai, UAE. The Bank of New York Mellon is supervised and regulated by the New York State Department of Financial Services and the Federal Reserve and authorised by the Prudential Regulation Authority. The Bank of New York Mellon London Branch is subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. Details about the extent of our regulation by the Prudential Regulation Authority are available from us on request. The Bank of New York Mellon is incorporated with limited liability in the State of New York, USA. Head Office: 240 Greenwich Street, New York, NY, 10286, USA. In the U.K. a number of the services associated with BNY Mellon Wealth Management’s Family Office Services– International are provided through The Bank of New York Mellon, London Branch, One Canada Square, London, E14 5AL. The London Branch is registered in England and Wales with FC No. 005522 and BR000818. Investment management services are offered through BNY Mellon Investment Management EMEA Limited, BNY Mellon Centre, One Canada Square, London E14 5AL, which is registered in England No. 1118580 and is authorised and regulated by the Financial Conduct Authority. Offshore trust and administration services are through BNY Mellon Trust Company (Cayman) Ltd. This document is issued in the U.K. by The Bank of New York Mellon. In the United States the information provided within this document is for use by professional investors. This material is a financial promotion in the UK and EMEA. This material, and the statements contained herein, are not an offer or solicitation to buy or sell any products (including financial products) or services or to participate in any particular strategy mentioned and should not be construed as such. BNY Mellon Fund Services (Ireland) Limited is regulated by the Central Bank of Ireland BNY Mellon Investment Servicing (International) Limited is regulated by the Central Bank of Ireland. BNY Mellon Wealth Management, Advisory Services, Inc. is registered as a portfolio manager and exempt market dealer in each province of Canada, and is registered as an investment fund manager in Ontario, Quebec, and New Foundland & Labrador. Its principal regulator is the Ontario Securities Commission and is subject to Canadian and provincial laws. BNY Mellon, National Association is not licensed to conduct investment business by the Bermuda Monetary Authority (the “BMA”) and the BMA does not accept responsibility for the accuracy or correctness of any of the statements made or advice expressed herein. BNY Mellon is not licensed to conduct investment business by the Bermuda Monetary Authority (the “BMA”) and the BMA does not accept any responsibility for the accuracy or correctness of any of the statements made or advice expressed herein.
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