March completed what will be remembered as a historic quarter. With a high degree of volatility, risk-oriented markets experienced considerable drawdowns as well as material rebounds toward the end of the month. In aggregate, however, most global equity markets produced returns in the -10% to -25% range over the month and in the -20% to -35% range for the quarter. In general, the US outperformed non-US, growth outperformed value, and large outperformed small.
With interest rates declining further, US Treasury securities were the sole area of positive returns for the month (excluding certain dynamic trading strategies). The Long US Treasury bond index produced a monthly return of roughly 6% that resulted in a quarterly return of nearly 21%.
The aggregate impacts to global GDP due to the COVID-19 pandemic are still unknown but are expected to be material. Macroeconomic data such as unemployment claims and manufacturing results have begun to illustrate the likely trajectory of GDP over the near term.
Although the US yield curve technically steepened in March, this was driven by the short-end of the curve as the Federal Reserve effectively cut rates to zero. As of the end of March, short-term yields (1- to 3-months) were approximately 0.05-0.10%, with long-term yields (20- to 30-years) around 1.15-1.35%.
Monetary and fiscal policies across the globe have shifted to become extremely accommodative. From indications of unlimited quantitative easing to massive fiscal stimulus, global authorities are unrolling historic policies to combat the pandemic from an economic standpoint.