The Year in Review: Q1 2020

The End of the Longest Bull Market Run in History

2020 has been a year to remember. Industries have adapted to changing consumer habits, markets have fluctuated, and people have spent countless hours on Zoom (ZM). Over the next week, we’ll break down important events that took place during each quarter of the year, starting today with Q1 of 2020.

When the first quarter of the new decade began, US stocks were in the longest bull market run in history and many people around the world had never heard of the coronavirus. The bull market continued for another two and a half months until COVID-19, as well as an oil price war, caused stocks to tumble.

Despite monetary initiatives from the central bank and fiscal packages from the government, the first quarter of 2020 was the worst Q1 in history for the Dow and the S&P 500. It was the worst overall quarter for the Dow since 1987 and the worst overall for the S&P 500 since 2008. Over the course of the quarter, the Dow Jones fell 23.2% ending up at 21,917. The S&P 500 sank by 20% and the Nasdaq composite index was down 14.2%.

Oil Demand and Prices Plummet

As stocks tumbled in Q1, so did the price of oil. Governments around the world imposed lockdown measures and travel restrictions to curb the spread of the novel coronavirus. Many began working from home and using less gas in their cars. People also canceled business and leisure air travel plans, which caused demand for jet fuel to plummet.

As demand for oil fell, supply spiked because of a price war between Saudi Arabia and Russia which resulted in the former flooding the market. This drove prices of the commodity even lower. At the end of the quarter, International benchmark Brent crude was trading at $22.71 per barrel, a 64% drop from where it started the quarter.

Due to uncertainty in the oil and equity sectors, many investors rushed to sell their riskier assets and invest in US government bonds. As a result, the 10-year Treasury note fell to a record of 0.318% at one point during the first quarter.

The Beginning of a Long Election Year

The first quarter of the year also marked the official start of an election year. In February, the Iowa caucuses took place, but a software glitch meant that results were delayed and the AP decided not to declare a winner.

In other political news, President Donald Trump ordered an airstrike which killed Major General Qassem Soleimani, the leader of Iran’s Islamic Revolutionary Guard Corps. Trump also signed a “Phase One” trade deal with China. In the quarter, the US government also implemented a number of travel bans, first from China, then from Iran, and then from 26 European countries.

At the end of the quarter, some believed that shutdowns and the pandemic would soon subside, but the next three quarters of the year had more upheaval in store.

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