As expected the biggest losers from the economic fallout are commodities and oil as global economic activity and demand came to a stop.
While every asset class is in decline since their 1-year peak, expect further declines across the board if commodity and oil prices start to creep into global inflation.
Inflation, potentially more impactful on stocks
May 12 the BLS releases the core inflation rate which is the headline inflation rate minus food and energy.
May 29 the BEA releases the core personal consumption expenditures price index rate which is also minus food and energy and the preferred inflation benchmark for the Federal Reserve.
The pre virus March rates were 2.1% and 1.3% year over year.
The next CPI & PCE release(s) could be a shock
As reflected in this chart, P/E ratios increase when the inflation rate trends toward price stability (near 1% inflation) and P/E ratios decline when the inflation rate trends away from price stability. The result is a “Y Curve” effect, where P/E declines into deflation despite low interest rates. This effect is consistent with the modern dividend discount model since earnings and dividends would be expected to decline during deflation and therefore would result in lower valuations.
If there’s even a whiff of deflation (or higher inflation) materially above 1-2% in either the May 12 BLS report or the May 29 BEA report, you should expect stocks to fall rapidly into the next wave down.