Market Review: Week Ending 6/26
Markets were dominated by Covid-19 news last week, as signs of accelerating new cases forced several states (Texas, Florida and Arizona) to roll back reopening plans. These fears led to a 2.9% drop in the S&P 500 Index for the week (and a large decline on Friday) with the index closing at 3009.1 Even the record 8.2% gain in May Personal Spending and the 16.6% gain in New Home Sales couldn’t rally stocks in the face of growing concerns over the coronavirus’ impact on the economic reopening, as the national number of new daily cases reached record highs of nearly 40k.1 Bank stocks lagged again (bank ETF KBE declined 9.7%1), as the Federal Reserve’s annual Stress Test capped dividends to earnings and eliminated share repurchases,1 both attempts to maintain the bank’s hard-fought capital adequacy ratios. As enthusiasm for the V-shaped recovery waned, bond yields continued to fall, with the 10-year Treasury Bond closing at 0.64% and the 5-year Treasury bond closing at an all-time low of 0.29%.1 Safety trades were back in vogue, which in today’s environment include the high-multiple Technology stocks that investors see as companies offering both growth potential and resiliency during stay-at-home periods. On the flip side of the safety trade are airlines, the most extreme reopening cyclical, where the JETS EFT has fallen 30% from its June 8th high.1 Until investors get a better understanding of the back half of 2020 earnings outlook and direction of the virus, which could come over the next few weeks during Q2 earnings reports, markets are likely to be whipsawed by news about Covid-19 cases and reopening results. Through the close Friday, year to date results for the major indices are as follows: S&P 500 -5.9%, Russell 2000 -16.8%, MSCI EAFE –11.4% and Bloomberg Barclays Aggregate Bond 6.1%.2
Want to know what we're watching in the week ahead? Check out the FULL REPORT in attachment section below.
Chad Roope, CFA®
Paul Danes, CFA®
1-Morningstar Direct 6/29/20