On Tuesday of this week, we closed out the second quarter of 2020. Not to be outdone by the volatile nature of the first quarter, the second quarter provided its share of major daily swings in stock prices. With significant movement in the market, constant changes in investor sentiment, relaxation of COVID-19 restrictions in many states, nationwide social unrest, and an upcoming presidential election, it proved to be a quarter of highs and lows all around. As we enter into the holiday weekend, here are some highlights from this week.
A Strong Start
On Monday, positive news regarding pending home sales and consumer confidence were released which proved to be the catalyst in recovering losses from last Friday. Pending Home Sales from May, were up 44% from April and The Conference Board’s Consumer Confidence Index numbers rose higher than anticipated for June, with an increase to 98.1 from May’s 85.9. The positive sentiment radiating from these headlines pushed Monday’s close back into the green.
By mid-week, May’s private payroll figures were revised upward from a loss of 2.76 million jobs to a gain of 3.065 million, with the largest gains in hospitality and small businesses, providing early indications of what could be an economic recovery. Despite some recent positive economic news, the reality remains that the market trades heavily on the headlines related to COVID-19. The number of new COVID-19 cases, hospitalizations, infection rates, deaths, and phased openings are the critical elements in market performance right now. As we draw closer to the upcoming election, politics will become a bigger ingredient in the market recipe.
Historically Strong Quarter
If ever there was a period which proved the point of staying invested, despite market conditions, then the last 6 months has been that market. Despite the turmoil that has ruled 2020 thus far, the second quarter of the year proved to be the best quarter for the Dow since 1987 (+17.8%), the best quarter for the S&P 500 since 1998 (+20%), and the best quarter for the Nasdaq since 1999 (+30.6%). This was not the outcome projected by most experts in March. The Nasdaq is now the first of the three indices to recover from the 14.18% loss it experienced last quarter.
Looking Towards Year-End
As we head into the second half of this year, and despite the overwhelming amount of positive economic information currently being reported, a backdrop of rising coronavirus cases, social unrest, and what will surely be an interesting presidential race, are looming large over what happens next. Due to the disconnect between perceived economic and market sentiment and the realities of what is happening in the country, we encourage investors to hold to their strategy; don’t get too enthusiastic or despondent on a day to day basis. As the rest of the year steps into view, stay focused on a 3-5 year time horizon and settle in to ride out what we expect will be a continued bumpy ride.
We wish you a safe, healthy, and happy Fourth of July weekend!
Ian Browning, CFA | Director, Investment Strategies & Shareholder
Peter E. Simmons, JD | President & CEO