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Market Outlook – Q2 2020

- April 15, 2020


“The worst pandemic in modern history was the Spanish flu of 1918, which killed tens of millions of people. Today, with how interconnected the world is, it would spread faster.”

Bill Gates, 2014

1Q, 2020 Market Review


“The Coronavirus is very much under control in the USA. We are in contact with everyone and all relevant countries. CDC & World Health have been working hard and very smart. Stock Market starting to look very good to me!”

Donald Trump, February 24, 2020

Lockdowns & Other Containment Working: Broad-Based Plateauing

Hopeful Signs that the Curve is Flattening

Global Recoveries Are Now Keeping Pace with Cases

Total Shutdowns, Partial Shutdowns & Some Increases

U.S. GDP Estimates

Trump vs. Biden

Election and Post Election Year Annual Returns for Large Cap

Most Measures of Core Inflation Have Come Down

Per Economists, Unemployment Rate Could Approach 20%

Unprecedented Central Bank Balance Sheet Expansion

Global Policy Response to COVID-19


“One of the things that we’re hearing a lot from business contacts and leaders in the community is our concerns that even as the pandemic passes, even as the restrictions are relaxed gradually over time, people may take quite a while before they’re willing to get back on airplanes or trains or go to the theater or go to concerts and things like that. So, I think there are some risks that it takes longer to get that recovery for the economy than just what happens in terms of the formal restrictions that are in place.”

John Williams, New York Fed President, April 2020

Equity Returns

Coronavirus Crisis vs. Major Bear Markets of History

Equity Market Internals: Decline & Rally

Higher Unemployment Generally Means Lower Equity Prices

The Great Battle of the Economy vs. Markets

Decline in EPS Has Driven Valuations to Cycle Highs

Emerging Mkt Equities Look Cheap Relative to Book Values, But...

Current Growth Cycle at Extreme Levels

CB Balance Sheets and Global Stocks

Buybacks: Large Source of Equity Demand Slowing

U.S. Corporate Profits Were Rolling Over Prior to Coronavirus

Venture Capital Washout

Markets Are Not Always as Efficient As We Think


“We can do what we can do, and we will do it to the absolute limit of those powers… we will keep at it, and we will be at it with the legal authorities that we have until we get through this thing. We will keep using our authorities… but there are authorities that we don’t have and there may be a need for those authorities to be used as well as ours.”

Jerome “Jay” Powell, Federal Reserve Chairman

Fixed Income & Credit Returns

A Record Year for U.S. Core Bonds

Negative Real Yields Across the Curve

Watch Credit to Lead Equities On the Way Out

Credit Was Already Cracking Before the Crisis Started

Credit Was Already Cracking Before the Crisis Started

U.S. Bank Provisions for Loan Losses Jump

Prior to Crisis, Leverage Was Above Last Cycle Peak

Leveraged Buyout Valuations


“There is no safe store of value. Deficit spending is simply a scheme for the hidden confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights.”

Alan Greenspan, Economist & Former Fed Chairman, 1966

Real Asset Returns

Negative Yielding Debt & Gold

Gold vs. Core U.S. Stocks and Bonds

U.S. Crude Oil & Gasoline Inventories Jump

Crude Briefly Trades Below Negative $38 Per Barrel

Commodities Below Cost of Production

Midstream Energy: Survivors Should Thrive

Retail, Hotel & Resort and Office REITs Remain Challenged


“Business are closing and people are unemployed through no fault of their own, and so moral hazard is not a relevant consideration”

Richard Clarida, Fed Vice Chairman

Opportunistic Strategy Returns

Closed-End Fund Discounts Got as Wide as the Financial Crisis

Like Gold, is Bitcoin Telling us Something About Macro Risk?


“An expert in any field will have an advantage over a rookie. But neither the veteran nor the rookie can be sure what the next flip will look like. The veteran will just have a better guess.”

Annie Duke, Thinking in Bets

Diversification Still Works Over the Long-Term

60/40 Expected Returns Rise as U.S. Stocks Decline

Equity Yields Still Competitive Relative to Bond Yields

Asset Class Correlations


Magnus Financial Group LLC (“Magnus”) did not produce and bears no responsibility for any part of this report whatsoever, including but not limited to any microeconomic views, inaccuracies or any errors or omissions. Research and data used in the presentation have come from third-party sources that Magnus has not independently verified presentation and the opinions expressed are not by Magnus or its employees and are current only as of the time made and are subject to change without notice.

This report may include estimates, projections or other forward-looking statements, however, due to numerous factors, actual events may differ substantially from those presented. The graphs and tables making up this report have been based on unaudited, third-party data and performance information provided to us by one or more commercial databases. Except for the historical information contained in this report, certain matters are forward looking statements or projections that are dependent upon risks and uncertainties, including but not limited to factors and considerations such as general market volatility, global economic risk, geopolitical risk, currency risk and other country-specific factors, fiscal and monetary policy, the level of interest rates, security-specific risks, and historical market segment or sector performance relationships as they relate to the business and economic cycle.

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Asset class performance was measured using the following benchmarks: U.S. Large Cap Stocks: S&P 500 TR Index; U.S. Small & Micro Cap: Russell 2000 TR Index; Intl Dev Large Cap Stocks: MSCI EAFE GR Index; Emerging & Frontier Market Stocks: MSCI Emerging Markets GR Index; U.S. Intermediate-Term Muni Bonds: Bloomberg Barclays 1-10 (1-12 Yr) Muni Bond TR Index; U.S. Intermediate-Term Bonds: Bloomberg Barclays U.S. Aggregate Bond TR Index; U.S. High Yield Bonds: Bloomberg Barclays U.S. Corporate High Yield TR Index; U.S. Bank Loans: S&P/LSTA U.S. Leveraged Loan Index; Intl Developed Bonds: Bloomberg Barclays Global Aggregate ex-U.S. Index; Emerging & Frontier Market Bonds: JPMorgan EMBI Global Diversified TR Index; U.S. REITs: MSCI U.S. REIT GR Index, Ex U.S. Real Estate Securities: S&P Global Ex-U.S. Property TR Index; Commodity Futures: Bloomberg Commodity TR Index; Midstream Energy: Alerian MLP TR Index; Gold: LBMA Gold Price, U.S. 60/40: 60% S&P 500 TR Index; 40% Bloomberg Barclays U.S. Aggregate Bond TR Index; Global 60/40: 60% MSCI ACWI GR Index; 40% Bloomberg Barclays Global Aggregate Bond TR Index.