Market Monitor: July 2, 2020, Update
Headlines and Highlights
- Stocks log best quarter in decades: Thanks to a record surge in April and May, the Standard & Poor’s 500 closed its best quarter since 1998 with a 20% gain as lockdowns ended and investors bet that the economy will recover comparatively quickly. International stocks outpaced their U.S. peers in June, while trailing them for the year. All major stock indexes besides the tech-centric Nasdaq remain in the red for 2020; bonds added gains in June and are positive on the year.
- Some re-openings pushed back as virus spreads: Officials in several U.S. areas scaled back or postponed stages in their economic re-openings as COVID-19 infections expanded. Arizona, California, Florida, Georgia and Texas were among states to report record numbers of new cases. Leaders took a number of steps to combat the surge, from shutting down indoor businesses in California to postponing the opening of restaurant dining rooms in New York City. Meanwhile, real-time data showed economic activity continuing to gradually climb back nationwide but still remain well below pre-COVID-19 levels.
- Global recession deeper than expected: The International Monetary Fund said the world economy will be hit even harder by the pandemic this year than it anticipated, predicting a 4.9% contraction after pegging it at 3% in April. The IMF noted that activity may have bottomed in April, although the recovery may be more gradual than previously thought. It foresees a global rebound of 5.4% in 2021 and U.S. growth of 4.5%.
Selected Market Returns
Sources: Morningstar, Altair Advisers
- Delays in reopening parts of the U.S. economy due to a resurgence of new coronavirus cases underscore that it will be a long climb back to pre-pandemic activity levels. We believe the recovery will be sustained, albeit likely through fits and starts. Recent data show rebounds in retail spending, employment, consumer confidence and industrial production.
- The global outlook is similarly mixed, with the pain from the lockdowns increasingly eased by improving economic reports. Surveys in both China and the 19-country eurozone this week showed manufacturing on the upswing, although the recovery is still expected to be slow.
- Efforts to contain and eventually halt the spread of COVID-19 will be the key factor in determining how fast the recovery proceeds, making estimates less reliable than usual. Federal Reserve Chairman Jerome Powell noted this week that the outlook for the economy is “extraordinarily uncertain.”
- Monetary support from the Fed remains unwavering, helping to keep a floor under markets and the economy. Even after initiating a program this week to buy newly issued corporate bonds directly from companies through its $500 billion Primary Market Corporate Credit Facility, the central bank still has multiple stimulus tools left that it can deploy to boost the recovery.
- Political tensions are certain to heat up in the coming months with control of both the White House and Congress at stake in November. The added uncertainty is likely to make for choppy markets in the runup to elections. Both parties are expected to agree this month on additional fiscal stimulus, however, providing as much as $1 trillion or more to further support both the economy and markets.
The material shown is for informational purposes only. Forward-looking statements are subject to numerous assumptions, risks, and uncertainties, and actual results may differ materially from those anticipated in forward-looking statements. As a practical matter, no entity is able to accurately and consistently predict future market activities, and all investments are subject to the risk of loss. While efforts are made to ensure information contained herein is accurate, Altair Advisers LLC cannot guarantee the accuracy of all such information presented. Material contained in this publication should not be construed as accounting, legal, or tax advice