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JUST ONE DAY OR HERE WE GO AGAIN? A LOOK AT PERFORMANCE DURING THE MARCH DECLINE.


JUST ONE DAY OR HERE WE GO AGAIN? A LOOK AT PERFORMANCE DURING THE MARCH DECLINE.

Monday was a rough day for stocks even after a late-day rally. The performance pattern of yesterday is reminiscent of the relative performance that took hold for a lot of the March sell-off and the eventual stock market rally when large TECH names, that seemed immune to and may actually benefit from the shutdown, outperformed the market. At the close of the market, the Nasdaq was almost unchanged, while the broad market (S&P500) closed down 1.16% and the DJIA closed down 1.84%.

The benchmark S&P500 has now not only fallen below its 6-month uptrend line, which marked the bulk of the recovery from the March lows, it has also moved below the August breakout to new all-time highs. Neither of these developments can be viewed as positive.


Although the impetus for Monday’s decline was probably the realization that Justice Ginsberg’s death will make a compromise in the House and Senate on new stimulus next to impossible, the charts below show that new cases of Covid-19 are also showing a change of direction. New cases had been declining, but recently they have either leveled off or started climbing, depending on your perspective. TPA does not think it is coincidental that the leveling in new cases is happening coincident with a rise in testing (see charts below).


Although one day does not a trend make, it is worth at least considering if the recent decline will continue. TPA has explained in previous World Snapshots that the next 6 weeks will be tough as we head into the November election, Flu season, and a potential next Covid-19 wave. This report will look at what areas of the market clients should avoid if the recent decline continues and performance patterns of March are visited upon September and October.

The table and charts below show which areas of the market fared the worst from the February peak (2/19) to the March nadir (3/23) and should be avoided if the recent decline continues.


SECTOR

The worst performing sectors from 2/19/20 to 3/23/20 was Energy. TPA has been negative on Energy for most of 2020. The next worst performing sectors in the March decline after Energy were Financials, Industrials, REITs, and Transports.

SUBSECTORS

Clients should especially avoid the following subsectors in the worst performing sectors in March. These subsectors were the underperformers of the worst sectors.

Energy:

· Drillers

· Equipment & Services

Financials:

· Regional Banks

· Banks

· Reinsurance

· Investment Banks

Industrials:

· Auto

· Aerospace

· Auto Parts

· Construction & Engineering

· Machinery

REITs:

· Retail

· Mortgage

Transports:

· Airlines

TPA provides relative performance charts of the 5 sectors and the corresponding subsectors below.


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