Skip to Content
Big Picture

Quarterly Market Insights in 5 Charts: Q1 2020

Morningstar’s first-quarter 2020 analysis demonstrates the severity of the economic impact of the coronavirus.

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.
Source: Morningstar equity data. ©2020 Morningstar. All Rights Reserved.

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. Source: Morningstar equity data. ©2020 Morningstar. All Rights Reserved.

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. Source: U.S. Federal Reserve. 10-Year U.S. Treasury Bonds—Bloomberg Barclays U.S. Treasury 7-10-Year Bond Index. 20-Plus-Year U.S. Treasury Bonds— Bloomberg Barclays U.S. Treasury 20-Plus-Year Bond Index. U.S. Corporate Bonds—Morningstar Corporate Bond Index. U.S. High-Yield Bonds— Bloomberg Barclays U.S. Corporate High-Yield Bond Index. USD EM Bonds—Morningstar EM Composite Bond Index. Local Currency EM Bonds— Bloomberg Barclays EM Local Currency Broad Bond Index. Yield curve data as of 3/31/2020. ©2020 Morningstar. All Rights Reserved.

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. Source: U.S. Department of Labor, Bureau of Labor Statistics. ©2020 Morningstar. All Rights Reserved.

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.

Download the full Morningstar Markets Observer to see our latest findings on U.S. market insights.
Get My Copy

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.