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Members of D.A. Davidson & Co.

Encouraging Signs Are on the Horizon

"The current decline differs from prior ones insofar as it appears no asset class or industry has been spared. Assets across the board have seen losses on a global basis. It is somewhat frustrating to date, as there is no or little differentiation, within U.S. equity markets at least, in terms of factors: quality, size, beta, balance sheet, dividends. But this is not to say differentiation will not come.


To provide some context on the current volatility: behind the correlated selling is a liquidity event. Across the globe there has been an insatiable thirst for dollars and liquidity. The financial system has already seen an enormous amount of deleveraging. Commodity trading accounts, volatility funds, risk parity funds and other client-oriented funds, as well as hedge funds, levered ETFs, MLPs — you name it — have delevered in the past two weeks. We are now likely at the lower end of leverage in the financial system. The volatility associated with this deleveraging should start to decrease as we go forward.


We are trying to make a bottom, but that is a process and not a day. It will ultimately depend on news flow and our ability to get a handle on the depth and length of the crises. If you look at the recessions we’ve had going back to the 1940s, from peak to trough, the markets lost 32% on average. Before the rally on March 24, we were near that 32% level."


(Encouraging Signs Are on the Horizon dated 03/25/20 by Scott Glasser Co-Chief Investment Officer, Managing Director, and Portfolio Manager with ClearBridge Investments, LLC)


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