After climbing to record highs in February, the S&P 500 ended the first quarter down -19.60%, which was its worst quarter since the financial crisis. There is a silver lining though–it could have been much worse. The index rallied 17.6% in just three days on news and hopes for both monetary and fiscal stimulus. This was the strongest three-day rally since 1933. Unfortunately, the rally was led by defensive sectors like utilities, real estate, and health care. These are not the sectors that typically lead in a bull market.

While we welcome the huge stimulus package and the Fed’s responses to the crisis, there is still a lot of uncertainty remaining. Investors discounted risk assets like stocks and high yield bonds for much of this uncertainty already, but we still won’t have a good gauge on what the magnitude of the economic impact will be until we get a handle on the duration of the social distancing policies. To get more clarity on that, we must see the spread of COVID-19 slow.

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Commentaries are published by Cetera Investment Management LLC, an SEC registered adviser owned by Cetera Financial Group. Cetera Investment Management provides market perspectives, portfolio guidance, model management, and other investment advice to its affiliated broker-dealers, dually registered broker-dealers and registered investment advisers.