Monthly Market Insights | June 2020

U.S. Markets

Stocks rallied in May, sparked by a supportive Federal Reserve, stories of states re-opening, and reported progress on a COVID-19 vaccine.

The Dow Jones Industrial Average rose 4.26 percent, while the Standard & Poor’s 500 Index picked up 4.53 percent. The NASDAQ Composite led, gaining 6.75 percent.1

The older I get, the smarter my father seems to get. Tim Russert, journalist and 16-year veteran of “Meet the Press,” making him the longest-serving moderator of the longest-running program in television history.

Shift in Focus

April’s positive momentum continued into May, as stocks registered healthy gains, and investors looked to future economic hopes rather than current woes.

Further aiding stocks was a better-than-expected jobs report and firming oil prices. Many investors breathed a sigh of relief on the news that U.S. and Chinese negotiators were planning to meet, despite the rising tensions between the two nations.

Fed's Commitment

Stocks rallied, as hopes for a COVID-19 vaccine rose, and the Federal Reserve restated its commitment to do whatever would be necessary to support an economic recovery.

Following Memorial Day weekend, stocks surged, once again, due to rising optimism over economic re-opening, reported declines in new COVID-19 cases, and further news surrounding the development of a potential vaccine.

Sector Scorecard

The majority of industry sectors moved higher in May, with increases in Communication Services (+11.54 percent), Consumer Discretionary (+7.79 percent), Energy (+7.63 percent), Financials (+4.23 percent), Health Care (+2.26 percent), Industrials (+5.93 percent), Materials (+6.33 percent), Real Estate (+2.29 percent), Technology (+9.69 percent), and Utilities (+0.14 percent). A small loss was experienced by Consumer Staples (-0.07 percent).2

U.S. Market Recap for May 2020
S&P 500 4.53% Month ‌ -5.77% Year-to-Date	NASDAQ 6.75% Month ‌ 5.76% Year-to-Date	Russell 1000 5.05% Month ‌ -3.36% Year-to-Date	10-Year Treasury 0.65% Month ‌ -1.27% Year-to-Date
Yahoo Finance, May 31, 2020. The market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid.

What Investors May Be Talking About in June

In some sense, many investors believe a sustained and complete economic recovery may rest on developing a vaccine for COVID-19.

Vaccine Watch

The World Health Organization reports that there are more than 100 vaccine candidates, with 10 currently participating in clinical trials.3

Over the next couple months, results from several of these trials may be released.4,5

Depending on the results, the trials could provide the markets with a sense of optimism. If they prove disappointing, investors may dread the prospect of a prolonged economic recovery. Either way, many investors are cautiously monitoring the situation for further developments.

World Markets

World markets also posted solid gains on economic recovery hopes, with the MSCI-EAFE Index rising 5.15 percent.6

European markets moved higher, with gains in France, Germany, and the Netherlands. The U.K. slipped 0.88 percent.7

Pacific Rim stocks were mixed, with advances in Australia (+5.37 percent) and Japan (+8.34 percent). Hong Kong dropped 6.83 percent due to China-related tensions. The volatile Merval Index, which tracks the largest companies based in Argentina, jumped 48.04 percent.8

World Market Recap for May 2020
Emerging Markets	May	Year-to-Date
Hang Seng (China)	-6.83%	-18.55%
Kospi (Korea)	4.21%	-7.65%
Nikkei (Japan)	8.34%	-7.52%
Sensex (India)	-3.84%	-21.40%
Jakarta Composite (Indonesia)	0.79%	-24.54%
Bovespa (Brazil)	8.57%	-24.63%
IPC All-Share (Mexico)	-0.95%	-17.04%
Merval (Argentina)	48.04%	-13.32%
ASX 200 (Australia)	5.37%	-12.94%
Europe
DAX (Germany)	6.68%	-12.55%
CAC 40 (France)	2.70%	-21.46%
Dow Jones Russia Index (Russia)	8.42%	-21.25%
FTSE 100 (Great Britain)	-0.88%	-19.66%
Yahoo Finance, May 31, 2020. The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.

Indicators

Gross Domestic Product

The economy shrunk at a 5.0-percent annual rate, higher than the initial estimate of 4.8 percent.9

Employment

The unemployment rate leaped to 14.7 percent, as nonfarm payrolls fell by 20.5 million. The unemployment rate was the highest seen since the Great Depression.10

Retail Sales

Retail sales plunged by 16.4 percent, with every sector lower except for non-store retailers, which are predominately internet-based merchants.11

Industrial Production

Industrial production fell 11.2 percent, the largest one-month drop in the index’s 100-plus-year history.12

Housing

Housing starts declined 30.2 percent to their lowest level seen since 2015.13

Existing home sales tumbled 17.8 percent in April, the largest one-month drop since July 2010. The supply of homes declined 19.7 percent. Tightening inventories led to a new record high in the median home sales price ($286,800).14

Sales of new homes rose 0.6 percent, a surprise increase amid a consensus forecast of a nearly 22-percent drop.15

Consumer Price Index

The price of consumer goods posted its largest monthly drop since 2008, falling 0.8 percent in April. Excluding the more volatile food and energy sectors, core inflation declined 0.4 percent, the largest monthly drop since 1957.16

Durable Goods Orders

Orders of long-lasting goods dropped 17.2 percent, with demand for transportation equipment falling an eye-catching 47.3 percent.17

The Fed

Minutes from the last Federal Open Market Committee meeting reaffirmed a commitment to maintaining a zero interest rate policy until inflation reaches the Fed’s two-percent target, and unemployment returns to its pre-COVID-19 level.

The Committee also focused on how they expect to use upcoming meetings to communicate about future policy decisions.

The minutes also reinforced recent comments that the Fed was not inclined to move toward negative rates.18

By the Numbers: Candy