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Tuesday, March 31, 2020
Action Insight Daily Report 4-1-20
Marching On
| Tuesday's Headlines 1. US markets tumble to end worst Q1 in history 2. Trump to ease some tariffs for 90 days 3. Historic lows for oil crack break-even prices 4. The best and worst assets of the first quarter Markets Closed
 photo: Bob Levey/Getty Images
Markets Today "If March comes in like a lion, it will go out like a lamb," so the saying goes. From our perspective, the whole month has been more like a cyclone that has knocked global markets into bear territory and wreaked historic bouts of volatility across every asset class. It's far from over yet, but since we are at the end of the month and the first quarter, it's a good time to take stock of where things stand.
The Dow and S&P 500 had their worst first-quarter performances ever, losing 23.2% and 20%, respectively. The Dow also had its worst overall quarter since 1987 while the S&P 500 had its biggest quarterly loss since 2008.
For the month, the Dow and S&P 500 fell 13.7% and 12.5%, respectively—the worst one-month declines since 2008.
We have a chart-fest for you right below your headlines. Scroll on down. Headlines:
 Global Markets' Winter of Discontent That's the understatement of the year, and it's only the end of March. Most developed markets are in deep bear territory, with Brazil, Mexico, and Canada suffering the most. The U.S. and Japan have recently rallied out of bear territory but the economic impacts of the global pandemic are just starting to manifest outside of Asia. Have investors priced that in already?
chart courtesy YCharts  Oil Prices are at Historic Lows Faced with the double-whammy of a global pandemic and a bitter split between OPEC (Saudi Arabia) and OPEC+ (Russia), oil prices are down around 60%, which has had a massive ripple effect throughout the petro-economy. Prices have fallen beneath the break-even level for most fossil fuel producers, which means it costs more to pump it out of the ground than what it sells for downstream.
chart courtesy BankofAmerica  The lower oil prices have naturally translated to lower gas prices, especially in the U.S. Normally, that would be good for consumers, except that no one is driving or flying anywhere.
source: AAA  Most Asset Classes Suffered Steep Losses It hasn't been just oil and other commodities that felt the pain this quarter. From copper to high-yield bonds, very few asset classes performed well as big investors sold basically everything to raise cash. We are very curious to see if and how they put that money to work in this coming quarter.  The Best & Worst Individual Stocks of Q1 Cruise companies, energy companies, and airlines found themselves on the selling end all quarter. A global pandemic and worldwide travel restrictions have paralyzed those industries, and they will not emerge from this crisis the same. While airlines and U.S.-based cruise companies may be in line for a bailout, the oil sector will see many defaults, bankruptcies, and job losses.  The best performing stocks of Q1 were a mix of drug companies working on COVID-19 cures; Clorox, which sold a lot of bleach and wipes; Netflix, because we are home; and NortonLifeLock, which is cashing in on cyber-security concerns. But Citrix Systems found its moment as working from home means we all need to connect through VPN and manage shared digital workspaces. This is likely a trend, so keep an eye on Citrix, Slack, Monday, Zoom, and all the other remote connectivity companies. 
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(chart courtesy YCHARTS)  Shares of Cigna are up by over 10% today; the insurance company announced yesterday that it will waive costs for all coronavirus-related treatments. Shares of medical supply company McKesson rose by nearly 10% following its recent announcement of a new multi-year strategic growth initiative.  Shares of Royal Caribbean are down by over 15% today; two different cruise ships belonging to the company had to have a crew member medically evacuated yesterday. American Airlines' stock price fell by nearly 13% after the company announced its plan to retire even more jets in response to the current economic situation. Word of the Day The Chicken Tax is a 25% tariff on light trucks imported to the U.S., imposed in retaliation for European tariffs on American chicken imports. The tariff was imposed in 1963 in an executive order issued by President Lyndon Johnson.
In the years since then, trade barriers have fallen and the average U.S. tariff rate on industrial imports stands at 2% as of late 2019, according to U.S. government figures. But the Chicken Tax still stands.  image courtesy: Priceline.com
Today in History March 31st, 1928: Alarmed at the feverish speculation in the bull market, Charles E. Merrill, the head of Merrill Lynch & Co., warns his clients to get out of stocks. "Take advantage of present high prices and put your own financial house in order," he pleads. Few listen, and Merrill looks like a fool. By the end of 1929, however, he looks pretty smart.
Joseph Nocera, A Piece of the Action: How the Middle Class Joined the Money Class (Simon & Schuster, New York, 1994), pp. 38, 79.
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