What a quarter to review, there’s a lot to talk about. In this letter, we hope to share with you what transpired in the market, what the response has been from policy makers, how our thinking evolved, what we think now, and how we have positioned our portfolios as a result. We apologize in advance for its’ length, but feel it necessary given the significance of what’s transpired in the world and in markets.
Q1 Market Recap
As you can see from the above graph, to call this a tough quarter is an understatement. Covid-19’s rapid spread started to impact markets in mid-February and as the measures to contain the virus escalated, the equity market began to process and react to an impending, open-ended global quarantine. The S&P 500 went from reaching an all-time high in mid-February to being more than 35% off that high a mere 4 1/2 weeks later. Other markets were similar in their reaction, and small cap US stocks fared even worse. Corporate credit took a hit as markets assessed which companies can weather a temporary and severe demand shock. Gold at first was a hedge, but then sold off with everything else as markets went into full liquidation mode. Even trading in US treasuries and agencies became erratic.
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