Weekly Review – 06/29/2020

June 29, 2020

Global stocks retreated last week on concerns that a recent surge of covid-19 cases will hamper economic growth.  Adding to the uncertainty last week, the Fed released the results of this year’s stress tests on banks and announced that bank buybacks are suspended through September and dividend growth will be capped and payouts based on a formula tied to trailing earnings … not unexpected.

On the week, the S&P 500 lost 2.9% while the DJIA gave back 3.3%. The Russell 2000 which represents small/midsized US companies also moved lower as it declined 2.8% for the week.  International markets were a bit better, but they still lost ground as developed international markets (MSCI EAFE) lost 1.3% while emerging markets (MSCI EM) closed lower by 0.1%. Bonds were a bit higher as the Bloomberg Barclays Aggregate finished ahead by 0.2% on the week. The 10yr Treasury ended last week at a yield of 0.64%.  Gold prices closed at $1,772.50 for a 1.5% advance for the week as investors fled to the safe-haven metal.  Oil prices dropped 3.4% to $38.49 per barrel as soft demand failed to dent more-than-adequate supply. Oil prices are down 37% year-to-date – a boom to consumers and most businesses.

Economic news last week was mixed.  On Monday, the National Association of Realtors reported that existing home sales for May dropped 9.7% to a seasonally adjusted annual rate of 3.91 million, missing expectations of 4.09 million.  On Tuesday, the U.S. Census Bureau reported that May new home sales jumped 16.6% month-over-month to a seasonally adjusted annual rate of 676,000, far exceeding consensus for 640,000.  On Thursday, initial jobless claims were 1.5 million, exceeding expectations by 150,000 while continuing claims dropped 1 million to 19.5 million (beating expectations of 20.0 million).  The Bureau of Economic Analysis reported on Thursday its final reading of first quarter GDP … results showed that economic growth contracted at a seasonally adjusted annual rate of 5.0%, in line with expectations.  Also on Thursday, the Commerce Department released its reading of new orders for manufactured durable goods in May; orders surged 15.8% versus expectations for a 10.45% gain.  Also on Thursday, U.S. initial jobless claims for the week ending June 20 declined from 1.54 to 1.48 million.

Investors will be watching the results of the re-openings in most states and countries around the world.  Continuing spikes in covid-19 cases will likely cause investors to take profits until the path forward becomes less murky.  We expect a bit of volatility during this holiday-shortened this week as the second quarter comes to a close.

Happy Fourth of July!

“Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it.”     Thomas Paine