On March 6, the S&P 500 dropped 7%, causing a 15-minute trading halt on all stocks as circuit breakers were triggered for the first time since 1997. This occurred three more times over the following two weeks—March 12, 16, and 18—as global equity markets priced in extreme uncertainties amid mounting concerns over the COVID-19 pandemic and its ramifications.
Yet, the end of an 11-year bull market is only one of numerous devastating consequences of the COVID-19 crisis. More than 10 million Americans filed for unemployment in the last two weeks of March. To help jump-start the struggling economy and get these workers back on their feet, the Federal Reserve slashed interest rates to near zero and launched a new round of quantitative easing. Congress also passed a $2.2 trillion stimulus package, the largest ever approved in history. As the quarter concludes, we reflect on the major trends that have shaped this unique moment in history.
Every quarter, Morningstar’s quantitative research team reviews the most recent U.S. market insights and evaluates the performance of individual asset classes. Then, we share our findings in the Morningstar Markets Observer, a publication that draws on quantitative analysts’ careful research and market insights.
Here are some of our latest quarterly market insights.
Stocks Tumbled 25% at a Historic Speed in February
This February, the stock market declined 25% over a span of 22 days, making it the fastest drop in the history of the stock market.
To put this into perspective, we graphed the trajectory of past downturns since 1926 and the number of days it took for the market to fall by the same proportion. As the chart below shows, it took 50 days for the market to decline 25% during the Great Depression and 344 days to do so during the 2007-09 recession.
Nearly all Industries Experienced Substantial Year-to-Date Downturns
All industries were negatively affected by the market downturn in the first quarter of 2020, apart from health information services, which had a positive, albeit small, year-to-date return. Even biotechnology, an industry which has experienced consistently high returns over the past decade, posted a negative year-to-date return.
It was a particularly bad quarter for oil- and gas-related industries, which declined more than 50%. Airlines and REITs specific to hotels and motels were also severely impacted as a result of travel restrictions and bans. The full list of best- and worst-performing industries is shown below. 
Drop in Economic Activity Lowered Yields Across the Board
The massive drop in economic activity caused by a nationwide lockdown, and the Federal Reserve’s aggressive easing efforts to combat the damaging effects of COVID-19, have depressed yields across the board.
At the end of 2019, the yield curve had been largely flat and at times inverted at the short end. But this quarter’s economic collapse, combined with positive expectations of a rebound after COVID-19 recedes, have left the yield curve in a steeply sloped pattern, with the short end at practically 0%. This is shown on the chart below. 
Unprecedented Pace of Job Losses Hit all the Anticipated Industries
Approximately 22 million Americans filed for unemployment in the four weeks leading up to April 6, for a weekly average of 5.5 million. This massive spike in claims is shown on the first chart below.
And the second chart below, based on official unemployment data for March, provides a preliminary look at the industries that are shedding the most jobs. Not surprisingly, leisure and hospitality have been hit the hardest, while construction, manufacturing, and transportation collectively accounted for 45% of total job losses. Payroll data for March suggest that closures of doctors’ offices, schools, and childcare services drove much of the increase in education and health services unemployment. 
Congress’ CARES Act Will Help Revive Low-Wage Workers
Accommodation and food-service businesses have been among the hardest hit by COVID-19, yet maximum unemployment benefits in many states are lower than the average weekly wages for workers in this sector.
The chart below shows the least and most generous state unemployment benefits relative to the average weekly earnings of this cohort’s workers in 2018, based on the latest available data. The CARES Act passed by Congress on March 27, 2020, is intended to help supplement state unemployment benefits for those facing COVID-19-related job losses; it provides $600 per week for a four-month period. With this income, lower-wage workers may receive more in unemployment benefits for the next few months than they earned while working.
