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Gene Walden
Senior Finance Editor

Stocks keep climbing as economy starts reopening

Thrivent Asset Management Contributors to this report: Mark Simenstad, CFA, Chief Investment Strategist; Darren Bagwell, CFA, Chief Equity Strategist; Steve Lowe, CFA, Vice President, Mutual Funds-Fixed Income; John Groton, Jr., CFA, Director of Administration and Materials & Energy Research; Matthew Finn, CFA, Head of Equity Mutual Funds; and Jeff Branstad, CFA, Senior Investment Product Manager
06/04/2020
By Gene Walden, Senior Finance Editor | 06/04/2020

With businesses across the U.S. beginning to reopen their doors, the stock market continued to rally in May, ending the month up more than 35% from its low for the year. The S&P 500® closed May at 3,044.31, which was 36.06% above its March 23 closing level of 2,237.40.

For the month, the S&P 500 was up 4.53% – and up 10.62% over the past 12 months. 

The strong market gains have come amidst rising optimism that the country is headed for a strong economic recovery. Since early March, the COVID-19 pandemic has cost the lives of more than 100,000 U.S. residents and forced about 40 million U.S. workers to file for unemployment. With gross domestic product dropping 4.8% in the 1st quarter, and a further drop expected in the 2nd quarter, the economy is considered to be in a recession.  

in the final weekend of May, human rights demonstrations erupted in dozens of cities throughout the U.S. and across Europe, leading to thousands of arrests and billions of dollars in losses from property damage and looting. Undaunted, the markets reopened on a positive note on Monday, June 1, with the S&P 500 posting gains the first two days of the month.

In addition to the growing hopes for an economic rebound, a catalyst for the strong market performance has been the unprecedented action of Congress and the Federal Reserve (Fed) to inject trillions of dollars into the economy to help keep businesses afloat and provide emergency income for laid-off workers.  

Oil prices also rallied from extreme lows in May, as OPEC countries cut production and motorists began to return to the road, raising expectations that the steep imbalance between oil supply and global demand would begin to diminish.

Drilling Down

U.S. stocks moving up

The S&P 500 was up 4.53%. in May after posting a 12.68% gain in April. (The S&P 500 is a market-cap-weighted index that represents the average performance of a group of 500 large capitalization stocks.)

The total return of the S&P 500 (including dividends) was 4.76% for the month of May.

The NASDAQ Index was up 6.75% for the month of May and was up 5.77% year-to-date. (The NASDAQ – National Association of Securities Dealers Automated Quotations – is an electronic stock exchange with more than 3,300 company listings.)

Retail sales plummet

With stores closing across the country due to the pandemic lockdown, retail sales declined 16.4% from the previous month in April and 21.6% from a year earlier, according to the Department of Commerce retail report issued May 15. Total sales for the February 2020 through April 2020 period were down 7.7% from the same period a year ago. 

Automobile sales were down 12.4% from the previous month in April and down 32.9% from a year earlier. Electronics and appliance stores were down 60.6% from the previous month and 64.8% from a year earlier. With many bars and restaurants closed, food services and drinking places were down 29.5% from the previous month and down 48.7% from a year earlier.

Food and beverage store sales were down 13.1% from the previous month, but up 12.0% from a year earlier.

Non-store retailers (primarily online) continued to benefit from the lockdown as more consumers turned to the internet to make their purchases. Sales were up 8.4% from the previous month and 21.6% from a year earlier.

Unemployment remains at Depression era levels

While the rate of new unemployment claims has started to decline, unemployment remains at Depression era levels. In the week ending May 23, the advance figure for seasonally adjusted initial claims was 2,123,000, a decrease of 323,000 from the previous week, according to the U.S. Department of Labor. The advance seasonally adjusted insured unemployment rate was 14.5% for the week ending May 16, a decrease of 2.6% from the previous week.

More than 40 million people have filed for unemployment benefits since mid-March. The spike in unemployment claims has come as businesses across the country have suspended operation to comply with the pandemic shutdown. But as businesses reopen, the employment picture should improve, although it could be many months before unemployment levels return to normal.

All sectors continue rebound in May

All 11 sectors of the S&P 500 made gains in May, led by the Information Technology sector, up 7.05%, Materials, up 6.97%, and Communications Services, up 6.01%.

The chart below shows the results of the 11 sectors for the past month and year-to-date:

Treasury yields stabilize

The yield on 10-year U.S. Treasuries has finally stabilized after a steep decline in recent months. After closing April at just 0.62% – the lowest yield since the government began offering bonds in 1790 – the yield moved up slightly to end the month of May at 0.65%. 

The decline in yields has been attributed to two significant cuts in the Fed funds rate by the Fed and to an increase in bond demand as investors sought a safe haven amidst the market turbulence.

Oil prices rally

Oil prices staged a strong rally in May, as drivers began returning to the road and the wide gap between supply and demand showed signs of narrowing. West Texas Intermediate, a grade of crude oil used as a benchmark in oil pricing, surged 88.38% in May, from $18.84% at the end of April to $35.49 at the May close. (See: Why oil prices dropped to negative)

International equities rebound

The global stock market has continued to rebound the past two months from a significant drop in March. After moving up 6.29% in April, the MSCI EAFE Index, which tracks developed-economy stocks in Europe, Asia and Australia, was up 4.07% in May. It is still down 15.31% year-to-date.

Media contact: Samantha Mehrotra, 612-844-4197; samantha.mehrotra@thrivent.com


All information and representations herein are as of 06/04/2020, unless otherwise noted.

The views expressed are as of the date given, may change as market or other conditions change, and may differ from views expressed by other Thrivent Asset Management, LLC associates. Actual investment decisions made by Thrivent Asset Management, LLC will not necessarily reflect the views expressed. This information should not be considered investment advice or a recommendation of any particular security, strategy or product. Investment decisions should always be made based on an investor's specific financial needs, objectives, goals, time horizon, and risk tolerance.

Indexes are unmanaged and do not reflect the fees and expenses associated with active management.

Investments cannot be made directly into an index.

Past performance is not necessarily indicative of future results.


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