The Virtus Equity & Convertible Income Fund, which tracks a blend of equity and convertible securities, faced downward pressure as broader market conditions weighed heavily on equities. The Federal Reserve's announcement on December 18, 2024, indicating a more cautious approach to interest rate cuts in 2025, sent ripples through the stock market. The S&P 500 fell 2.9%, while the Dow Jones Industrial Average and Nasdaq composite dropped 2.6% and 3.6%, respectively. This shift in monetary policy expectations led to a rise in Treasury yields, further squeezing stock valuations, particularly impacting sectors sensitive to interest rate changes.
The market's reaction was compounded by algorithmic trading activity, as evidenced by record low prints in the TICK Index, signaling significant selling pressure. The fear of continued algorithmic selling kept potential dip buyers at bay, exacerbating the decline in stock prices. Additionally, the Russell 2000 index of small-cap stocks, which often includes companies reliant on borrowing for growth, tumbled 4.4%, highlighting the broader market's vulnerability to rising interest rates.
The Virtus Equity & Convertible Income Fund (NIE) closed at $23.68, marking a 2.59% decline from the previous day, with a slight 0.17% uptick after market hours.