Nasdaq max drawdown9/5/2023 ![]() ![]() On an absolute basis all sectors faced steep declines, however from 2020 highs the defensive Staples (-26%) and Healthcare (-30%) sectors had the least drawdowns. Conversely the Nasdaq 100 (-30%) was the relative outperformer on all three measures (YTD %, March %, and 2020 max drawdown). Its relative underperformance was due largely to its outsized exposure to Financials, and relatively low exposure to Technology. For the quarter, the Russell 2000 had one of the largest drawdowns (-44%) while bottoming within 3% of its 2016 lows. The Dow also had its third largest single-session decline (-13%), its single worst Q1 (-23.2%), and its 7 th worst quarter ever. This measures its third largest MoM decline on record, trailing only The Great Depression (Q4’29) and Black Monday (Q4’87). From its February high to March low, the Dow Jones Industrials declined 38.3%. To start, equities crashed into a bear market from all-time highs in the fastest time on record. The immediate performance numbers are on par with the darkest periods since the early 1900’s, let alone the bursting of the DOTCOM and Housing bubbles. However, open capital markets keep us abreast of price, and recent price action has been historic. With containment, global economic activity has slowed dramatically. Congress has done its part with a $2.8T fiscal stimulus package (13% of GDP). Over the last four weeks the Fed’s balance sheet has already expanded by more than $1T, or 26%, to $5.25T, and it could be set to reach $9T in 2H 2020. The Fed has led the response in part by lowering overnight rates to zero, providing unlimited QE, backing private credit, opening trillions in REPO facilities, and expanding USD swap lines to 14 countries. In turn, policy makers and regulators have had no choice but to inject massive amounts of liquidity and stimulus. From an economic perspective, the cure may be as bad as the disease. The global “virus policy response” was initially staggered, but most of the world is currently adhering to a strategy of containment, social distancing, and economic stoppage with the essential goal of flattening the virus curve. The United States (178k), Italy (106k), Spain (95K) China (83k), and Germany (68k) have the highest number of confirmed cases, while the state of New York (75K) alone ranks 4 th amongst all countries. Global confirmed cases and deaths escalated from roughly 11,500 and 360 at the end of January, to 832,000 and 41,000 by the end of March. In less than two months the COVID-19 pandemic spread outside of China’s borders and quickly became the largest global health crisis since the Spanish flu in 1918. March was a historic month for virtually all asset classes, and with it marked the end of the longest running bull market for U.S. Crude had its worst quarter on record with WTI falling below $20 per barrel.The Fed, Treasury, Regulators, and Congress responded with massive coordinated intervention.Long rates made record lows while the short end (1M – 12M) temporarily went negative in late March.The Dow Industrials had its top 3 largest drawdown (MoM) since the start of the 20 th. ![]() Asset classes experienced historic price swings on par with any era since the early 1900s. ![]()
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