Yesterday’s Insight Extra featured commentary surrounding the coronavirus. Therefore, we won’t dive too deep on that topic again today. We will, however, discuss the impact on S&P 500 one-week performance. The index is down 7.94% and all sectors are down for the week. The sector with the worst performance continues to be Energy, which is down close to 13%. The Information Technology sector has seen the starkest turnaround. A week ago, the sector was up 12% for the year, leading it to be the best performing sector in the index. Over the last week, Information Technology was the second worst performing sector, down 9.87%. Now the sector is up 1.01% for the year as of yesterday. Concerns around supply chain disruptions have contributed to the negative performance of the Information Technology sector. Real Estate and Utilities sectors are holding up the best. They are two of the three sectors with positive returns for the year. A flight to safety has likely contributed to the resilience of these two. They are up 3.22% and 4.14% respectively for the year.

Earnings season is ending. A little over 90% of S&P 500 companies have reported. This week’s reports reinforced the better than expected earnings that have come in previous weeks. Based on the companies that have reported, earnings grew by 3.4%. We don’t expect the remaining 10% of companies left to report to meaningfully impact this growth number. This growth in earnings is 3.1% better than expected. We have also seen sales growth of 6%, which is 1.8% better than expected. The top and bottom-line growth from the fourth quarter 2019 was expected to continue into the first quarter of 2020. However, these expectations for the quarter are beginning to turn negative due to the virus. As mentioned in yesterday’s Insight Extra, a main concern is the disruption of supply chains caused not just by the virus, but by countries reacting to the virus.

In fixed income markets, interest rates continue to decline as investors take risk off the table and chase the safety of bonds. The 10-year closed yesterday with a yield of 1.33%. This is the lowest number in the 30 years of data we reviewed.

Contributed by | Kuuku Saah, CFA, Managing Director

Kuuku is a Managing Director at BTC Capital Management with nine years of investment management experience. Kuuku’s primary responsibilities include portfolio management and analysis. Kuuku attended Drake University and double-majored in finance and economics. He is a holder of the right to use the Chartered Financial Analyst® designation.

Source: BTC Capital Management, Bloomberg LP, Ibbotson Associates, FactSet.
The information provided has been obtained from sources deemed reliable, but BTC Capital Management and its affiliates cannot guarantee accuracy. Past performance is not a guarantee of future returns. Performance over periods exceeding 12 months has been annualized.

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