The U.S. markets continue to exhibit extreme volatility in the wake of conflicting news concerning the economy and the ongoing developments pertaining to the Coronavirus pandemic. First quarter of the year 2020 (ending on March 31st) saw S&P 500 delivering its worst quarterly return since 2008 – declining by 20%.
Though the month of April 2020 has shown signs of recovery with the S&P 500 delivering a positive return of 2.89% so far (at the time of writing this report), the markets still continue to exhibit volatility.
Below shared charts show a tug of war between bulls and bears. The S&P 500 has continued to swing towards either side, every week since the start of the year 2020. The length of these swings has only increased in recent weeks.
The markets are being driven downward by the latest news such as 10 million Americans filing unemployment claims in just over 2 weeks. U.S. policymakers have evidently adopted a “whatever it takes approach” to support the economy. In similar spirits, the Fed has communicated its willingness to significantly expand its $4.5 trillion balance sheet to support the markets through its purchasing program in the primary and secondary markets. Congress approved a $2.2 trillion stimulus plan that may further provide support to small businesses and households.
Meanwhile, oil prices surged this Tuesday as a result of news that U.S. producers were starting to cut down on their output in order to help ease pressure on high U.S. crude inventories.
How to participate in this market?
In the absence of a reliable solution to the current pandemic, we continue to believe that a value-oriented approach is suitable for long-term investors. Short term investors may want to employ a technical and news based trading approach. The recent volatility could provide good opportunities for technical traders.