Positive Economic Outlook Leads to Another Uptick for US Equity Markets
Market Recap week ending 5.29.20
The holiday-shortened week produced another uptick for US equity markets. The S&P 500 traded through its 200-day moving average of 3001 to close the week higher by 3%. Optimism gained from the reopening of state economies were reinforced by a positive outlook for the economy by JP Morgan’s and Bank of America’s CEOs. The Dow led gains with an advance of 3.8%, while the Russell 2000 increased by 2.8%, and the NASDAQ gained 1.8%. US and Chinese trade relations continued to be in focus for investors. President Trump ended the week with a press conference that only reiterated the US government’s stance on China but left current Phase one trade initiatives in place. Safe-haven assets were relatively quiet again this week with Gold gaining $16.30 to close at 1751.40 an Oz. The 2-year Treasury note yield lost two basis points to close at .15% while the 10-year US Treasury Bond lost one basis point to close at .65%. The Fed announced that it would curtail its Treasury purchased to 4.5 billion in the coming week, down from 5 billion in the prior week. Oil prices continued to gain on strong prospects coming out of Asian demand. WTI gained 6.3% on the week, or $2.08 to close at 35.33 a barrel. There were no new changes to our models.
News stories from around the country showed Americans enjoying their Memorial Day holiday. TSA traffic continued to show demand for air travel, and roadway traffic appeared to increase over the last couple of weeks. The optimism surrounding the reopening of state and global economies continued to provide investors with a reason to buy stocks. Value-oriented sectors such as the Financials and Industrials showed nice gains. The Financial sector gains were reinforced by positive comments on the economic recovery out of JP Morgan’s CEO, Jamie Diamond, and Bank of America’s CEO Brian Moynihan.
After a strong start to the week, investors took the sidelines to assess the increase of US/China tensions. Geopolitical fall out from China’s most recent initiatives in Hong Kong induced a strong condemnation from the United States Congress. On Friday, President Trump announced that he would revoke special privileges afforded to Hong Kong and will open an investigation into foreign companies listed on US stock exchanges to make sure their accounting and ownership records comply. The President did not indicate any further tariffs or suggest that the terms of the Phase one deal with China would change. The markets rallied off the no new news press conference, and some see the open rhetoric as perhaps an olive branch for further negotiations with China. Separately, the President announced that the US would no longer fund the World Health Organization.
