Global equity markets tumbled Monday, continuation of concerns around the growth of the COVID-19 virus, and new fears of a price war between Saudi Arabia and Russia after the Organization of the Petroleum Exporting Countries (OPEC) failed to come to a consensus around oil production. On Saturday, Saudi Arabia slashed official crude oil selling prices for April and is preparing to increase production, indicating a sudden shift from their previous stance to support the oil market as global demand weakened from coronavirus fears. The price cut comes after a breakdown in OPEC talks last week, with Russia rejecting additional cuts. Oil had its worst day since 1991 during the Gulf War, diving more than 30% at intra-day lows, causing additional uncertainty and volatility in global markets.
In the US, major US indices fell more than 7% at the open, causing trading to be halted for 15 minutes within 5 minutes of the open. In Europe, major indices fell more than 7%, entering bear market territory. Globally, bond yields fell, with the US 10-year Treasury yield falling to a new record low of 0.32%, while expectations of additional rate cuts by the Federal Reserve have risen significantly since last week. Experts are mixed regarding oil forecasts in 2020, with some anticipating further price decreases and others viewing this as a short-term event as the two sides will eventually come to an agreement.
Periods of elevated short-term volatility present attractive opportunities for long-term investors. With equity markets globally 15% to 20% off of February highs and the significant drop in interest rates, we are tactically looking for opportunities to rotate into undervalued equity markets to take advantage of opportunities, and using the pullback to harvest losses in the portfolio from a tax standpoint.
As always, we are here for you. We have designed portfolios around your financial goals that are meant to be long-term and are happy to discuss market conditions or any other questions.