Fright and Flight in February

Monthly Market Snapshot: February 2020


Investors sought out “safe-havens” towards the end of February as the coronavirus spread beyond the borders of China. In the United States, the S&P 500 plunged 8.4% while the Dow Jones tumbled 10.1%. The 10-year U.S. Treasury yield plummeted from 1.51% at the end of January to 1.15% at the end of February.

The coronavirus continues to cloud the economic outlook. Prior to the virus, the global economy was starting to stabilize after a manufacturing-led slowdown, but a “supply-side” shock from disruptions to supply chains and a “demand-side” shock from self-quarantines now pose a risk to growth that is hard to quantify. Past viruses suggest that this will likely take a quarter or two to play out.

On February 24th, Citi Private Bank’s Global Investment Committee (GIC) decided to reduce its exposure to global equities by moving from an +3.0% overweight position to a neutral position. Those reductions in equity exposures are being offset by a reduced underweight in global fixed income (from -4.0% to -2.0%; essentially adding to the overweight position in U.S. Treasuries) and an increase in the gold position (from +1.5% to 2.5%). While the GIC reduced its equity rating, Citi’s year-end target for the S&P 500 remains 3,375.