As highlighted last night, the weakness in the early going looks to be pretty severe.  The S&P 500 (SPX) Futures are limit down, and we wanted to highlight the three “circuit breakers” once the cash market opens:

 

  1. SPX drops 7% trading is halted for 15 minutes
  2. SPX drops 13% trading is halted for another 15 minutes
  3. SPX drops 20% trading halts for day

 

Again, the historic drop in Oil on the unexpected move by Saudi Arabia to start a price war is having an dramatic impact on Credit in the U.S.  Until last week, we believe the credit markets were staying in relatively good shape and only reacting a little bit to the volatility in the equity market.  This move has caused significant weakness that is hopefully going to catch the attention of the Fed and other government officials.

 

Again, our game plan is unchanged…we are closer to an offensive position, but the playbook on these type drops are once you make the initial low, there is usually a multi-week rally that works off the oversold condition, then as the weaker economic and corporate news is announced the market tests the low.  We see no reason to believe it is going to be different this time.

 

Past performance is not a guarantee of future results. Index returns are unmanaged and do not reflect the deduction of any fees or expensesAll data points are sourced from Bloomberg as of 3/9/2020 unless noted otherwise.




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