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Market Highlights Q2 2020
If you need some good news to lift your spirits this quarter, look no fur- ther than the stock market. Between government relief programs practically giving away money and interest rates near 0%, investors chose to put their money in the one place that offered the potential for growth: stocks.
While volatility was rampant through- out the quarter, the markets took a much-needed turn after a dismal first quarter to post their best quarterly returns since 1998. Stocks rose as investors focused on favorable economic data and the possibility of additional government stimulus—despite rising virus cases and continued trade tensions with China.
Of the benchmark indexes listed here, the Nasdaq again proved the strongest, soaring more than 30% for the quarter, followed by the small caps of the Russell 2000, which gained 25%. The large caps of the S&P 500 and the Dow closed the second quarter up nearly 20%, while the Global Dow vaulted ahead by more than 14%. Year to date, the Nasdaq remains the only index well ahead of its 2019 year-end closing value. While still in the red, the S&P 500 is within 5% of last year’s final mark, followed by the Dow, the Global Dow, and the Russell 2000.
With stock prices rebounding to record highs, all eyes are on the key economic indicators as investors try to make sense of what to expect as we slow-walk into the second half of the year. Indeed, there are storm clouds on the horizon. Unemployment claims in May spiked to 25 million—a level not seen since the Great Depression. As states slowly began to reopen, new claims dropped. Still, employment is far below the level needed for a healthy economy, many Americans are likely to remain out of work for some time, and some job losses may be permanent. Interest rates are an essential tool in the Fed’s arsenal. Jay Powell, Fed Chair, says the Fed intends to keep rates in the 0%-.25% range. The Fed’s mission is to “assure that the recovery...will be as robust as possible.” But with economic growth declining at an annualized rate of 5% per year and the resurgence of virus cases already in play, a sustainable recovery may not happen until 2022.
While it’s easy to be lulled into a sense of comfort when the stock market seems healthy, economic indicators tell a different story. Once states can ease restrictions and reopen businesses, the economy will begin the slow process of recovery, but the keyword here is ‘slow.’ Moving forward, we will continue to watch the situation closely and adjust your plan as necessary to seek opportunities for protection and growth. In the meantime, stay safe and stay well.
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