Month Economic Commentary May 20

?In this month’s recap: Stocks rebounded sharply, fueled by a flattening of the COVID-19 curve and positive results from clinical trial investigating a treatment for the virus                     

 U.S. Markets     Stocks rebounded sharply in April, fueled by a flattening pandemic curve and positive results from a clinical trial investigating a treatment for COVID-19. The Dow Jones Industrial Average, which dropped 1% in March, jumped 11.08%. The Standard & Poor’s 500 Index rose 12.68%, and the NASDAQ Composite surged 15.45%

Slowdown in Infections     Just as it appeared that April might be a repeat of March, stocks turned higher with signs of a slowdown in COVID-19 infections, especially in Italy and New York state. Though jobless claims were breathtakingly high, they were expected, allowing investors to focus on positive developments. A more stable bond market also helped support the rally.  The stock market struggled to move higher, as a weak start to earnings season and troubling economic data created some underlying crosscurrents.

Gains Despite Stalled Momentum      Momentum stalled as oil prices drifted lower, but accelerated again on the news of positive results from a clinical trial investigating a treatment for COVID-19.  Stocks continue to climb higher as more states begin the initial phase of reopening their economies and others have announced target reopening dates.

Sector Scorecard         All industry sectors moved higher in April, with increases in Communication Services (+18.10%), Consumer Discretionary (+19.66%), Consumer Staples (+10.19%), Energy (+37.17%), Financials (+11.28%), Health Care (+17.88%), Industrials (+11.24%), Materials (+20.81%), Real Estate (+9.45%), Technology (+16.83%), and Utilities (+5.26%). 2

 What Investors May Be Talking About in May   The national dialogue over the COVID-19 outbreak has shifted toward restarting the economy, with state and national leaders devoting more attention to plans of loosening the shelter-in-place and social-distancing guidelines. There are two key aspects that investors may be watching as they try to figure out the pace of the recovery.

State by State     The first factor is the nature of the reopening. The White House plan for restarting the economy involves a three-step process, but leaves the decision-making to the governors of the states. The reopening timing and process may vary depending on health experts’ assessments of the risk profile of each state as well as voter sentiment to return to their usual activities.

The second factor is the public’s confidence in resuming their pre-quarantine routines. How soon will people be showing up to work, going out to eat, and traveling? That is a clear unknown at this time.