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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Planning Ahead for 2021
Creating a Budget
2020 might go down in history as the year of canceled and changed plans, but it is almost over and 2021 is within sight. Kicking off 2021 with a few simple money management plans is a great way to turn over a new leaf, or build on previous saving successes. This week in our newsletter we’ll be bringing you a series of easy money-management tips to help get your year off to a good start.
Creating a budget for the year can be a great way to get set up for saving success. Many people like to put together monthly budgets, but it’s also an option to make weekly or yearly budgets.
To make a monthly budget, begin by calculating your monthly income. If you have one job and your employer deducts taxes from your paychecks, your monthly income is what is leftover, often called your take-home pay. If you have more than one job, or other sources of money coming in, like dividends from investments or a side-hustle, add these to your monthly income.
After calculating your monthly income, look at your fixed expenses. Fixed expenses are bills you pay each month, like rent, mortgage payments, or loans. It’s easy to keep track of these expenses because, if bills are paid on time, these expenses should stay the same each month.
Next, figure out your variable expenses. These are expenses that change month-to-month. For example, heating and cooling bills might change depending on the time of year. Money spent on gas, groceries, clothes, and other items can also vary. It can be helpful to look back at past bank and credit card statements and calculate what you are spending on variable expenses on average.
Knowledge Is Power
Once you have calculated your income, fixed expenses, and variable expenses, you have a clear picture of your finances. With this knowledge, you can make a plan for how you want to save and spend your money this year.
Setting goals is a great way to stick to a budget. Maybe you’re saving up to buy a home, or for retirement, or for a much-needed vacation. Whatever it is, keeping a goal in mind is helpful for staying on track.
In order to reach these big goals, look at where you might be able to cut down your expenses. For example, cooking at home instead of ordering takeout a few times a month can make a big difference over the course of a year. Additionally, checking your bank statements for subscription services that you may be paying for, but not using anymore, is another good way to trim expenses. A few little changes can go a long way.