Tag: Covid-19

In this month’s recap: stocks rose as better-than-expected corporate earnings and progress on a COVID-19 vaccine encouraged investors

Presented by The Meridien Team, August 2020

U.S. Markets

Stock prices rallied in July as further development of a COVID-19 vaccine and better-than-expected corporate financial reports encouraged investors.

The S&P 500 gained 5.5 percent, while the Nasdaq Composite picked up 6.8 percent. The Dow Industrial Average, which has lagged much of the year, rose 2.4 percent.¹

Confident Investors

Stock prices started the month elevated, thanks to early results from a COVID-19 vaccine trial, a better-than-expected jobs report, and a higher-than-anticipated reading on manufacturing activity.

Despite multiple states reporting increases in infections, stocks continued their climb, especially in the mega-cap technology companies. Meanwhile, investors remained confident, even as multiple regional Federal Reserve presidents warned of a bumpy economic recovery

Earnings Update

As of July 31, more than half of the companies comprising the S&P 500 Index reported their earnings. Of these companies, 84 percent reported earnings in excess of analysts’ estimates, with the Health Care and Technology sectors leading the way.²

In the final week of trading, investor sentiment alternated between worry and optimism. A disappointing jobless claims report and a stunning second-quarter GDP number caused some worry. But the mega-cap technology names reported exceptional earnings, capping off a strong month for the equity markets.

Sector Scorecard

Industry sectors were uniformly higher in July, except for a loss in the Energy sector (-4.36 percent). Gains were made in Communication Services (+6.09 percent), Consumer Discretionary (+6.72 percent), Consumer Staples (+7.03 percent), Financials (+3.80 percent), Health Care (+6.07 percent), Industrials (+4.80 percent), Materials (+7.01 percent), Real Estate (+4.28 percent), Technology (+3.11 percent), and Utilities (+7.62 percent).³

What Investors May Be Talking About in August

In the last ten years, August has gained a reputation for being one of the more volatile months of the year.

For instance, in August of 2019, the S&P 500 Index posted moves of more than one percent in 11 of the 22 trading days, with three daily drops of more than 2.6 percent. At the time, trade friction with China was escalating, and some market watchers suggested that the bond market was signaling a recession on the horizon.^4,5

One of the reasons for the past volatility is that some traders are away on vacation, resulting in lighter volume, which may have the effect of amplifying market volatility. But this year may be different since many people are staying closer to home due to the pandemic.

This August will stand on its own merits. But investors should be prepared for headlines that could result in out-sized moves.

T I P   O F   T H E   M O N T H
 

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World Markets

Overseas markets were mixed. Optimism for the development of a COVID-19 vaccine was offset by continued tension between the U.S. and China. The MSCI-EAFE Index advanced 2.23 percent.⁶

European stocks trended lower as multiple economies continued to reopen, and the European Union agreed to a fiscal stimulus package for member nations. German shares edged higher, while France lost ground.⁷

Pacific Rim stocks were mixed. Australia rose 0.51 percent, while Japan fell 2.59 percent. The volatile Argentinian market rose nearly 28 percent.⁸

Indicators

Gross Domestic Product: The economy contracted by an annualized rate of 32.9 percent in the second-quarter GDP.⁹

Employment: The unemployment rate declined in June to 11.1 percent (from May’s 13.3 percent rate) as the economy added 4.8 million jobs.¹⁰

Retail Sales: Consumer spending rose 7.5 percent in June, aided by the reopening of malls and restaurants. Sales were largely driven by autos, clothing, furniture, and electronics.¹¹

Industrial Production: Output by the nation’s manufacturers, utilities, and mines increased by 5.4 percent. Manufacturing jumped by 7.2 percent.¹²

Housing: Housing starts leaped by 17.3 percent; though, new construction remains behind last year’s pace.¹³

Posting its largest monthly jump ever, existing home sales soared 20.7 percent in June.¹⁴

New home sales rose 13.8 percent, touching its highest sales pace in 13 years.¹⁵

Consumer Price Index: : Consumer inflation jumped 0.6 percent in June, which economists attributed to a snapback in prices from COVID-19-related declines in the previous three months. Gasoline prices soared 12.3 percent, accounting for more than half of the month’s increase in the CPI.¹⁶

Durable Goods Orders:   Durable goods orders increased 7.3 percent, as an 86 percent leap in orders for new cars and trucks offset a sharp drop in aircraft manufacturing.¹⁷

Q U O T E   O F   T H E   M O N T H

“I like a teacher who gives you something to take home to think about besides homework.”

LILY TOMLIN

The Fed

As expected, the Federal Reserve left its benchmark interest rate unchanged at its two-day meeting, which ended July 29. The Fed also reiterated its commitment to bond purchases and the lending and liquidity programs it currently has in place.¹⁸

Source: Yahoo Finance, July 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.

T H E  M O N T H L Y   R I D D L E

How is it possible to name three consecutive days without using the words Monday, Tuesday, Wednesday, Thursday, Friday, Saturday, or Sunday

LAST MONTH’S RIDDLE: Haretown and Tortoiseville are 44 miles apart. A hare travels at 8 miles per hour from Haretown to Tortoiseville, while a tortoise travels at 3 miles per hour from Tortoiseville to Haretown. If both set out at the same time, how many miles will the hare have to travel before meeting the tortoise en route

ANSWER: 32 miles. They will meet each other in 4 hours. The hare will have traveled 32 miles in that time (4 x 8mph); the tortoise, 12 (4 x 3mph).

The Meridien Team may be reached at 866-871-9963 or meridienteam@pensionmark.com
https://pensionmarkmeridien.com/
 

Know someone who could use information like this?
Please feel free to send us their contact information via phone or email. (Don’t worry – we’ll request their permission before adding them to our mailing list.)

Pensionmark^® Financial Group, LLC (“Pensionmark”) is an investment adviser registered under the Investment Advisers Act of 1940. Pensionmark^® is affiliated through common ownership with Pensionmark Securities, LLC (member SIPC).

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. The information herein has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate, and when redeemed, may be worth more or less than when originally invested. This information should not be construed as investment, tax, or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs, or expenses. Investors cannot invest directly in indices. All economic and performance data is historical and not indicative of future results. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The Nasdaq Composite Index is a market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor’s 500 (S&P 500) is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The CBOE Volatility Index ^® (VIX ^® ) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx ^® , and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world’s largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. The SSE Composite Index is an index of all stocks (A shares and B shares) that are traded at the Shanghai Stock Exchange. The CAC-40 Index is a narrow-based, modified capitalization-weighted index of 40 companies listed on the Paris Bourse. The FTSEurofirst 300 Index comprises the 300 largest companies ranked by market capitalization in the FTSE Developed Europe Index. The FTSE 100 Index is a share index of the 100 companies listed on the London Stock Exchange with the highest market capitalization. Established in January 1980, the All Ordinaries is the oldest index of shares in Australia. It is made up of the share prices for 500 of the largest companies listed on the Australian Securities Exchange. The S&P/TSX Composite Index is an index of the stock (equity) prices of the largest companies on the Toronto Stock Exchange (TSX) as measured by market capitalization. The Hang Seng Index is a free float-adjusted market capitalization-weighted stock market index that is the main indicator of the overall market performance in Hong Kong. The FTSE TWSE Taiwan 50 Index is a capitalization-weighted index of stocks comprises 50 companies listed on the Taiwan Stock Exchange developed by Taiwan Stock Exchange in collaboration with FTSE. The MSCI World Index is a free-float weighted equity index that includes developed world markets and does not include emerging markets. The Mexican Stock Exchange, commonly known as Mexican Bolsa, Mexbol, or BMV, is the only stock exchange in Mexico. The U.S. Dollar Index measures the performance of the U.S. dollar against a basket of six currencies. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability, and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. MarketingPro, Inc. is not affiliated with any person or firm that may be providing this information to you. The publisher is not engaged in rendering legal, accounting, or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.

CITATIONS:

1. The Wall Street Journal, July 31, 2020

2. FactSet Research, July 31, 2020

3. Nasdaq.com , July 29, 2020

4. CNBC.com, August 31, 2019

5. MarketWatch, August 1, 2019

6. Schaeffersresearch.com, July 24, 2020

7. CNBC.com, July 31, 2020

8. The Wall Street Journal, July 31, 2020

9. The Wall Street Journal, July 30, 2020

10. MarketWatch, July 2, 2020

11. Reuters.com, July 16, 2020

12. The Wall Street Journal, July 15, 2020

13. CNBC.com, July 17, 2020

14. The Wall Street Journal, July 22, 2020

15. MarketWatch.com, July 24, 2020

In this Q2 recap: the economy measures the impact of the coronavirus threat; the stock market rises with help from a dovish Federal Reserve and a rebound in some economic indicators; oil prices and mortgage rates touch historic lows.

Presented by The Meridien A review of Q2 2020, Presented by The Meridien TeamTeam, June 2020

THE QUARTER IN BRIEF

As a new quarter begins, we look back on an eventful second quarter for households and investors – a quarter in which the economy took a mighty hit, while the stock market soared. Complying with stay-at-home orders, Americans abruptly cut back on discretionary spending, traveling, and commuting, resulting in a dire scenario for some industries. Unemployment rose as business revenue declined. Fundamental economic indicators saw big swings, and on one trading day, oil prices actually collapsed into negative territory. Homes became easier to finance; though, transactions declined. The Federal Reserve made proactive moves to try and foster a bit more economic stability. While Main Street quieted, Wall Street rallied, sensing that an economic rebound might be starting. The Standard & Poor’s 500 gained 19.95% for the quarter. ¹

DOMESTIC ECONOMIC HEALTH

The economy was certainly thrown for a loop this spring. Statistically speaking, some of the numbers were startling. Others were not as bad as some analysts thought they would be.

As workers were laid off, the jobless rate went north. The April employment report from the Bureau of Labor Statistics showed unemployment at 14.7% in March, with 78.3% of this population being furloughed with the potential to return to their jobs. May’s report showed a record monthly job gain, as nonfarm payrolls swelled with more than 2.5 million net new hires in April; the jobless rate fell to 13.3%. As the May numbers went public, however, the BLS admitted it probably under counted the furloughed in April and that unemployment likely topped 16% in the fourth month of the year. The U-6 unemployment rate, which also counts part-time workers and discouraged job seekers, reached 21.2% in May. ²

Many Americans received an economic stimulus from the federal government this spring, an Economic Impact Payment of up to $1,200, resulting from the passage of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Will there be another? With the current $600 monthly boost to unemployment insurance slated to fade away at the end of July, a decision on a second stimulus payment could happen in the third quarter. ³

The stay-at-home orders hurt consumer spending and retail sales, but there was also a comeback. Personal spending weakened 12.6% in April, while retail sales slumped 14.7%. May’s numbers were different: with help from states relaxing stay-at-home orders, personal spending rose 8.2%, and retail sales advanced 17.7%. ⁴  

Americans definitely put more of their money in the bank during Q2, or at least, under the mattress. The personal savings rate, already up to 12.7% in March, increased to a record 33.0% in April. It was still at 23.2% in May. ⁵    

The Conference Board’s monthly Consumer Confidence Index stayed under 90 in the first two months of Q2 before staging a June rebound. The gauge came in at 85.7 in April, 85.9 in May, and 98.1 in June. The University of Michigan’s Consumer Sentiment Index never cracked 80. It displayed an April reading of 71.8, a May reading of 72.3, and a June mark of 78.1. ^6,7

Monthly reports from the Institute for Supply Management found that the service sector had contracted sharply at the start of spring along with manufacturing. ISM’s Purchasing Managers Index for service businesses came in at 41.8 for April and 45.4 for May; any number under 50 indicates reduction rather than growth. The Institute’s factory PMI showed similar numbers: 41.5 in April, 43.1 for May. ⁸  

Amid all these developments, the Federal Reserve remained proactive. With short-term interest rates back near zero, the central bank used other tools to try to help the economy and send dovish signals to financial markets.

In their June 10 policy statement, Fed officials pledged to increase their purchases of Treasury notes and mortgage-linked securities in the “coming months.” During each month of Q2, the Fed bought $80 billion of the former and $40 billion of the latter. On June 15, following up on a provision of the CARES Act, the Fed announced that it was ready to build a portfolio of investment-grade corporate bonds, as a nod to big businesses dealing with financial anxieties. The median 2020 forecast of Fed policymakers now projects 9.3% joblessness by the end of the year and gross domestic product (GDP) retreating 6.5% for 2020. Most Fed officials now think short-term interest rates will remain at historic lows into 2022. ^9,10

Last month, the private-sector National Bureau of Economic Research, a respected arbiter of U.S. economic cycles, stated that America’s ten-and-a-half-year economic expansion had ended. By its analysis, a recession had begun in February. ³

GLOBAL ECONOMIC HEALTH

During April, the International Monetary Fund forecast the global economy to shrink by 3.0% in 2020. In June, it estimated the economic damage would be worse. The IMF’s chief economist, Gita Gopinath, termed the coronavirus pandemic a crisis “unlike anything the world has seen before,” one that could send both developed and emerging economies simultaneously into recession for the first time since the 1930s. Gopinath did state that “pent-up consumer demand” for goods and services might hasten a global rebound. ¹¹

China’s closely watched manufacturing industry contracted slightly in April, but expanded again in May, at least by the measure of the Caixin/Markit Manufacturing Purchasing Managers Index. The private survey showed a factory PMI reading of 49.4 in April, then improvement to 50.7 a month later. China’s official factory PMI displayed a 50.8 mark for April, a 50.6 reading for May, and a 50.9 mark for June. ^4,12  

The European Central Bank made a major policy decision on June 4, nearly doubling the amount of its current monthly bond purchases to €1.35 trillion for at least the next 12 months. Seventy-six percent of European economists in a June Reuters poll believed the ECB would make further policy moves this year, and 56% felt that the bank would expand the scope of its bond-buying to an even greater degree. In addition, the European Commission proposed creating a €750 billion recovery fund to help eurozone nations ride through economic challenges. ¹³

WORLD MARKETS

The MSCI EAFE Index (a benchmark for developed equity markets in Europe and the Asia-Pacific region) and the MSCI Emerging Markets Index posted double-digit gains in the quarter; although, they were still down year-to-date as June ended. The EAFE rose 14.17% in three months; the Emerging Markets, 17.27%. ¹⁴

A quick look across the world reveals many other climbs for stock indices. Three-month gains of 10% or more were common this spring. For example, Russia’s RTS soared 26.51%, while Germany’s DAX jumped 25.42%. France’s CAC 40 rose 12.73%; Spain’s IBEX 35, 8.58%. Away from Europe, Australia’s All Ordinaries gained 15.54%, and South Korea’s Kospi, 22.78%. Japan’s Nikkei 225 increased 16.78%; India’s Nifty 50, 24.40%. China’s Shanghai Composite and Hong Kong’s Hang Seng both saw smaller gains: the former benchmark rose 8.64%; the latter, 5.40%. Argentina’s Merval improved 67.54%; Brazil’s Bovespa, 30.38%. ¹⁵  

COMMODITIES MARKETS

April 20 was a historic day in commodities trading. With a May contract expiring and demand for oil suddenly drying up, the price of West Texas Intermediate (WTI) crude oil dropped more than 300% in a single trading session, sliding from $17.85 down to an all-time low of -$37.63 at close. Oil quickly rebounded from this aberration. By the end of the quarter, a barrel of WTI crude was worth $39.70. The commodity gained 32.11% across the three months, ending in June. RBOB gasoline made an even greater advance, gaining 57.37% in the same period. Natural gas was a Q2 loser, with prices slipping 12.67%. ^16,17  

Key precious and semiprecious metals also posted quarterly gains. Silver jumped 23.57%, and gold improved 7.65%. Silver was worth $18.06 an ounce when the quarter ended; gold, $1,781.20 an ounce. Copper futures advanced 23.45%; platinum futures, 11.62%. Palladium futures pulled back 11.51%. The U.S. Dollar Index lost 1.04%. ¹⁷

Agricultural futures were a mixed bag. Cotton notched a 3-month advance of 11.48%, while coffee retreated 14.63%. Orange juice improved 7.61%, and sugar, 4.81%. Wheat slumped 12.62%; corn, 7.65%. Soybeans fell 1.74%; cocoa, 1.63%. Lumber had one of the quarter’s biggest gains, up 32.35%. ¹⁷  

REAL ESTATE

Mortgages grew cheaper as declining inflation pressure influenced long-term interest rates. The average interest on a 30-year, fixed-rate home loan fell to a historic low of 3.13%, as reported in Freddie Mac’s June 18 Primary Mortgage Market Survey. That was where it remained in the last PMMS of the quarter, released on June 25. The average interest rate on the 15-year, fixed-rate mortgage also trended downward, landing at 2.59% in the June 25 PMMS. ¹⁸

30-year, and 15-year, fixed-rate mortgages are conventional home loans generally featuring a limit of $510,400 ($765,600 in high-cost areas) that meet the lending requirements of Fannie Mae and Freddie Mac, but they are not mortgages guaranteed or insured by any government agency. Private mortgage insurance, or PMI, is required for any conventional loan with less than a 20% down payment.

Stay-at-home orders and COVID-19 fears disrupted existing home sales. The National Association of Realtors announced a 17.8% fall for residential resales in April (following an 8.5% slip in March). In May, sales fell another 9.7%. The spike in joblessness thinned the number of potential buyers, and analysts wondered if sellers might soon reduce their asking prices. The inventory of existing homes for sale grew, at last, increasing 6.2% between April and May. New home sales were down 5.2% in April, but improved 16.6% in May, according to the Census Bureau. ^4,19

Home building activity slowed as the quarter began, then picked up. Housing starts dipped 26.4% in April and improved 4.3% in May. In another positive development, building permits for upcoming projects increased by 14.4% in May. ²⁰

T I P   O F   T H E  QUARTER
 

There still may be time left to make a 2019 contribution to an Individual Retirement Account (IRA) or Health Savings Account (HSA). The Internal Revenue Service has extended the 2019 contribution deadline for both these accounts to July 15, 2020.

LOOKING BACK, LOOKING FORWARD

The rally that started in late March continued in the second quarter. Traders were encouraged by better-than-expected earnings in certain industries, positive news about potential COVID-19 treatments and vaccines, and the commitment of the Federal Reserve to address turbulence in the economy and the markets.

All three of the big Wall Street benchmarks recorded their best quarters of the century. As you look at the table below, note the difference in their year-to-date performance. The Nasdaq Composite closed at 10,020.35 on June 10, reaching a new milestone. The Nasdaq ended Q2 at 10,058.77; the S&P, at 3,100.29; the Dow Jones Industrial Average, at 25,812.88. ^1,21

Sources: cnbc.com, cnn.com, treasury.gov – 6/30/20 Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends. 10-year Treasury yield = projected return at maturity given expected inflatioNn.

As this quarter starts, investors are wondering… is the worst of this recession now behind us? A quick answer may prove elusive. The third quarter may bring more signals that Main Street is bouncing back, but it could also bring a reversal of economic momentum if states continue to halt or reverse phases of opening. For the market to climb higher off of its Q2 melt-up, earnings and economic indicators have to keep showing improvement or least stability. The same goes for COVID-19 case counts. If they keep rising this summer, the bulls could easily be held back.

Q U O T E   O F   T H E   QUARTER

“The best way to predict the future is to invent it.”

ALAN KAY

The Meridien Team may be reached at 866-871-9963 or meridienteam@pensionmark.com
https://pensionmarkmeridien.com/
 

Know someone who could use information like this?
Please feel free to send us their contact information via phone or email. (Don’t worry – we’ll request their permission before adding them to our mailing list.)

Pensionmark^® Financial Group, LLC (“Pensionmark”) is an investment adviser registered under the Investment Advisers Act of 1940. Pensionmark^® is affiliated through common ownership with Pensionmark Securities, LLC (member SIPC).

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. The information herein has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs, or expenses. Investors cannot invest directly in indices. All economic and performance data is historical and not indicative of future results. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is a market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor’s 500 (S&P 500) is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The CBOE Volatility Index ^® (VIX ^® ) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx ^® , and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world’s largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade   The Hang Seng Index is a benchmark index for the blue-chip stocks traded on the Hong Kong stock exchange. The KOSPI is an index of all stocks traded on the Korean Stock Exchange.  The Nikkei 225 is a stock market index for the Tokyo Stock Exchange. The SENSEX is a stock market index of 30 companies listed on Bombay Stock Exchange. The Jakarta Composite Index is an index of all stocks that are traded on the Indonesia Stock Exchange. The Bovespa Index tracks 50 stocks traded on the Sao Paulo Stock, Mercantile & Futures Exchange. The IPC index measure of companies listed on the Mexican Stock Exchange. The MERVAL tracks the performance of large companies based in Argentina. The ASX 200 index is an index of stocks listed on the Australian Securities Exchange The DAX is a market index consisting of the 30 German companies trading on the Frankfurt Stock Exchange. The CAC 40 is a benchmark for the 40 most significant companies on the French stock market index. The Dow Jones Russia Index measures the performance of leading Russian Global Depositary Receipts (GDRs) that trade on the London Stock Exchange. The FTSE 100 Index is an index of the 100 companies with the highest market capitalization listed on the London Stock Exchange. The U.S. Dollar Index measures the performance of the U.S. dollar against a basket of six currencies. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. MarketingPro, Inc. is not affiliated with any person or firm that may be providing this information to you. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.

CITATIONS:

1 – CNBC.com, June 30, 2020

2 – CNBC.com, June 5, 2020

3 – MSN.com, June 18, 2020

4 – NRF, June 30, 2020

5 – BEA.gov, June 30, 2020

6 – Investing.com, June 30, 2020

7 – Data.sca.isr.umich.edu/, June 26, 2020

8 – Institute for Supply Management, June 3, 2020

9 – Yahoo! Finance, June 10, 2020

10 – Business Financial Post, June 10, 2020

11 – CNBC.com, June 16, 2020
12 – CNBC.com, June 1, 2020
13 – Reuters.com, June 12, 2020

14 – Yahoo! Finance, June 30, 2020

15 – Barchart.com, June 30, 2020

16 – Global Risk Insights, May 29, 2020

17 – Barchart.com , June 30, 2020

18 – FreddieMac.com, June 30, 2020

19 – TradingEconomics.com, June 30, 2020

20 – CNBC.com, June 17, 2020
21 – Wall Street Journal, June 30, 2020

In this month’s recap: stocks rallied in May, sparked by a supportive Federal Reserve, stories of states re-opening, and reported progress on a COVID-19 vaccine.

Presented by The Meridien Team, 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 4.2%, while the Standard & Poor’s 500 Index picked up 4.5%. The NASDAQ Composite led, gaining 6.7%. ¹

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%), Consumer Discretionary (+7.79%), Energy (+7.63% Financials (+4.23%), Health Care (+2.26%), Industrials (+5.93%), Materials (+6.33%), Real Estate (+2.29%), Technology (+9.69%), and Utilities (+0.14%). Consumer Staples experienced a small loss (-0.07%). ²

What Investors May Be Talking About in June

In some sense, many investors believe a sustained and complete economic recovery may rest upon 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.

T I P   O F   T H E   M O N T H
 

Updating your will is as important as having one. If you drafted a will years ago, it may likely need some adjustments. Revisit your will often and keep it up to date.

World Markets

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

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

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

Indicators

Gross Domestic Product: The economy shrunk at a 5.0% annual rate, higher than the initial estimate of 4.8%. ⁹

Employment: The unemployment rate leaped to 14.7%, 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%, with every sector lower except for non-store retailers, which are predominately Internet-based merchants. ¹¹

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

Housing: Housing starts declined 30.2% to their lowest level seen since 2015. ¹³

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

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

Consumer Price Index: The price of consumer goods posted its largest monthly drop since 2008, falling 0.8% in April. Excluding the more volatile food and energy sectors, core inflation declined 0.4%, the largest monthly drop since 1957. ¹⁶

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

Q U O T E   O F   T H E   M O N T H

“The older I get, the smarter my father seems to get . “

Tim RUSSERT

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 2% 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

Sources: 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.

T H E  M O N T H L Y   R I D D L E

Here’s a food riddle. Someone strips away the outside of this food, leaving you free to boil, cook, or grill the inside. (So, what was the “inside” is now an uncovered outside.) You eat the new outside and throw away the inside of that. What food are you eating?

LAST MONTH’S RIDDLE: Its teeth are sharp, and its spine is straight. It is not innately vicious, it does not hunt, but to cut things up is definitely its fate. What is it?

ANSWER: A saw.

The Meridien Team may be reached at 866-871-9963 or meridienteam@pensionmark.com
https://pensionmarkmeridien.com/
 

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CITATIONS:

1 – The Wall Street Journal, May 31, 2020

2 – FactSet Research, May 31, 2020

3 – Who.int, May 27, 2020

4 – CNBC.com, May 13, 2020

5 – NBCnews.com, May 8, 2020

6 – MSCI.com, May 31, 2020

7 – MSCI.com, May 31, 2020

8 – MSCI.com, May 31, 2020

9 – The Wall Street Journal, May 28, 2020

10 – The Wall Street Journal, May 8, 2020

11 – The Wall Street Journal, May 15, 2020 

12 – The Wall Street Journal, May 15, 2020

13 – CNBC.com, May 19, 2020

14 – CNBC.com, May 21, 2020

15 – CNBC.com, May 26, 2020

16 – The Wall Street Journal, May 12, 2020

17 – CNBC.com, May 28, 2020

18 – The Wall Street Journal, May 20, 2020