The US economy started off the year on a positive note before social distancing restrictions in response to COVID-19 led to the start of a sharp deceleration. The unemployment rate stood at a 50-year low while wage growth remained comfortably range-bound thereby not threatening profit margins. Progress on the US-China trade deal provided some clarity that buoyed business confidence late last year. Globally, growth exhibited signs of improvement early in 2020 but that changed quickly.

Despite lingering volatility, the past week provided modest relief as US stocks bounced back and finished the week higher. The indiscriminate selling and extreme panic of the prior week gave way to bargain hunting. More economically sensitive stocks fared better during the rebound compared to defensive sectors and investment grade corporate bonds also improved, both encouraging news. Such signs of risk-taking are the first signals that a bottom in the market is forming.

Over the past weekend, the Federal Reserve (Fed) lowered short-term interest rates by a full percentage point and announced a restart of bond purchases. Additional rate cuts were expected and while a restart of bond purchases was a possibility, the timing and magnitude of both the rate cuts and bond purchases, $700 billion, were somewhat of a surprise. The Fed sent a powerful message that it will do what it can, and quickly, to assist the economy and financial markets..

The tough times that global markets were experiencing due to the spread of COVID-19 (coronavirus) worsened this past weekend as a price war between Saudi Arabia and Russia resulted in sharply lower oil prices. The news could not have a come at a worse time for already nervous markets and the combination of events is testing investors’ patience.

It’s been a tough week. Despite a slowdown in the number of coronavirus cases in China, cases have increased globally, and new cases have been confirmed in the United States. Countries are making progress with containment, but those efforts are likely to result in a reduction in economic activity, adding to market uncertainty.