ND&S Weekly Commentary 6.22.20 – Re-openings Continue

June 22, 2020

Despite some volatility during the week, as investors continued to assess the reopening of the economy, equity markets rebounded posting their fourth weekly gain out of the past five weeks. Last week the S&P 500, DJIA and NASDAQ were up 1.9%, 1.1% and 3.7%, respectively. For the week, the strongest sectors were health care, technology and consumer staples. Technology stocks continued to be among the leaders and the sector is the best performing year-to-date in the S&P 500 up 12.1%. There is some evidence that the stock market advance is starting to broaden out as earlier this month more than 97% of stocks in the S&P 500 traded above their 50 day moving average … it is a fairly rare occurrence for breadth to be so strong and it usually forecasts good markets ahead. International equities also advanced last week with MSCI EAFE up 2.1% and emerging markets up 1.5%. Going forward, investors will continue to be focused on economic recovery signs, virus hot spots and increasingly on the upcoming Presidential election.

Fixed income markets also advanced slightly as the Fed continues to ensure that sectors of the bond market function normally. The 10yr Treasury closed at a yield of 0.70%, unchanged from the prior week. Interest rates are likely to remain quite low for the months ahead. Bonds should offer investors some protection in the event of a shock to the equity markets. Investors should continue to monitor their asset allocation targets and re-balance as appropriate.

The U.S. Commerce Department reported last week that retail and food-services sales rebounded 17.7% in May, greatly exceeding estimates for an 8.4% advance. This after retail sales plunged a combined 21.8% in March and April. Jobless claims from the previous week were 1,508K which missed estimates although continue to trend in a positive direction. This week we’ll get fresh numbers on durable goods orders, personal income and spending and existing/new home sales.

“It always seems impossible until it’s done.” – Nelson Mandela