Today was one of those crummy market days where you feel pretty confident about the outcome of the day about thirty minutes in to the session, the only question being how bad everything will end up. And it was bad… Small Caps giving up over 7% while most other indexes lost just around 5% for the day. A bummer of a day to be sure, but rest easy :), most often days like this are followed by a bounce.
This means that the micro-rally we saw over the past ten days is gone, save for Emerging Markets. It was a fun ride while it lasted. Once again it was a Momentum and Growth day Small Cap and Value stocks leading the losses (I mean everything lost today, but some things were worse).
Look, the reality is that we should expect ups and downs as the markets and investors assess and digest just what the heck is happening in the economy, and what is going to happen over the next many months. Things are very uncertain and that leads to volatility. Lots of companies are going to have multi-year earnings damage because of what we see happening across the globe right now, and frankly a lot of companies will go out of business in the end.
Does this necessitate a market crash? Who knows. In my mind I see a whole bunch of short term pain, followed by a more protracted period of markets and economies changing to reflect new values that come out of this crisis.
With greater volatility and dispersion among stocks, this should be a golden opportunity for active funds to show their value. I’ll cover the current state of active management later this week. Also, look for articles on ESG sector positioning, Small Cap performance, Value Stock Performance, and the long disparity between Emerging and International markets and the US.
Cheers, and Don’t Panic
Nathan
