06/8/2020

06/8/2020

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Weekly Investment Update

<!– {"name":"Case Study","type":"layout","children":[{"name":"Top Image (Featured Image)","type":"section","props":{"style":"default","width":"default","vertical_align":"middle","title_position":"top-left","title_rotation":"left","title_breakpoint":"xl","image_position":"center-center","height":"full","padding_remove_top":false,"padding_remove_bottom":false,"image_size":"cover","padding":"xlarge","image_effect":"parallax","image_parallax_bgy_end":"100","image_parallax_bgy_start":"-100","animation":"fade","animation_delay":true,"image_parallax_breakpoint":"m","image_width":"1560"},"children":[{"name":"","type":"row","props":{"layout":"1-3,2-3","divider":true,"vertical_align":true},"children":[{"name":"","type":"column","props":{"image_position":"center-center","vertical_align":"middle","media_overlay_gradient":"","width_small":"1-3"},"children":[]},{"name":"","type":"column","props":{"image_position":"center-center","text_color":"light","vertical_align":"middle","media_overlay_gradient":"","width_small":"2-3"},"children":[]}]}],"source":{"query":{"name":"posts.singlePost"},"props":{"image":{"name":"featuredImage.url","filters":{"search":""}}}}},{"name":"Blog Content","type":"section","props":{"style":"default","width":"default","vertical_align":"middle","title_position":"top-left","title_rotation":"left","title_breakpoint":"xl","image_position":"center-center","padding":"large","padding_remove_bottom":false,"animation_delay":false},"children":[{"name":"","type":"row","props":{"layout":"1-3,2-3","vertical_align":false},"children":[{"name":"","type":"column","props":{"image_position":"center-center","media_overlay_gradient":"","width_small":"1-3"},"children":[{"type":"image","props":{"margin":"default","image_svg_color":"emphasis","image":"wp-content\/uploads\/sites\/8\/2020\/06\/Trans_Blue-Crown.png"}},{"name":"","type":"headline","props":{"title_element":"h2","title_decoration":"bullet","title_style":"h3","content":"06\/8\/2020"},"source":{"query":{"name":""},"props":{}}},{"name":"","type":"headline","props":{"title_element":"h2","title_decoration":"bullet","title_style":"h3","content":"06\/8\/2020"},"source":{"query":{"name":"posts.singlePost"},"props":{"content":{"filters":{"search":""},"name":"author.nickname"}}}},{"type":"list","props":{"show_image":false,"show_link":true,"image_svg_color":"emphasis","image_align":"left","image_vertical_align":true,"list_size":"","list_element":"ul","column_breakpoint":"m"},"children":[{"type":"list_item","props":{"content":"

Categories”}},{“type”:”list_item”,”source”:{“query”:{“name”:”categories.customCategories”,”arguments”:{“id”:0,”offset”:0,”limit”:10,”order”:”term_order”,”order_direction”:”ASC”}},”props”:{“content”:{“name”:”name”,”filters”:{“search”:””}},”link”:{“name”:”link”,”filters”:{“search”:””}}}}}],”name”:”Blog Category List”}]},{“name”:””,”type”:”column”,”props”:{“image_position”:”center-center”,”media_overlay_gradient”:””,”width_small”:”2-3″},”children”:[{“name”:””,”type”:”headline”,”props”:{“title_element”:”h1″,”item_maxwidth”:”large”,”content”:”Weekly Investment Update”},”source”:{“query”:{“name”:””},”props”:{}}},{“name”:””,”type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”content”:”

Markets continued to rally last week, marking one of the best weeks in years\u00a0as\u00a0the S&P 500\u00a0index\u00a0rose nearly 5%.\u00a0\u00a0However, the productive\u00a0period\u00a0for equity markets was\u00a0overshadowed\u00a0in a week that\u00a0may\u00a0otherwise be remembered for\u00a0mass\u00a0protests across the country sparked by the death of George Floyd.\u00a0\n

The index is now approximately flat for 2020\u00a0after having declined as much as\u00a034% through late March.\u00a0 While the decline witnessed so far in 2020 was one of the most significant in the history of the S&P 500 index, Chart 1 below\u00a0illustrates\u00a0that large market pullbacks are normal, even in years in which the index makes significant gains (data as of June 4 and does not include large market gain from Friday, June 5).\u00a0 2020 has certainly been a volatile year so far, but the sharp\u00a0market\u00a0pullback and rebound should serve as a reminder to investors that short-term market movements are very difficult to predict.\u00a0″},”source”:{“query”:{“name”:””},”props”:{}}},{“type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”content”:”

Chart 1: S&P 500 Annual Returns vs. Intra-Year Declines”}},{“type”:”image”,”props”:{“margin”:”default”,”image_svg_color”:”emphasis”,”image”:”wp-content\/uploads\/sites\/8\/2020\/06\/sp-annual-returns-vs-intrayear-declines_6.8.png”}},{“type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”text_size”:”small”,”content”:”

Source: JPMorgan Guide to the Markets, data as of June 4, 2020″}},{“name”:””,”type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”content”:”

Much of the gain last week occurred on Friday following a blowout employment report for May that was one of the most surprising in the history of economic forecasting.\u00a0 Economists\u2019 consensus expectations were for the US to shed an additional 8.3 million jobs in May and for the headline unemployment rate to spike over 20%.^{1\u00a0 The actual unemployment rate fell to 13.3% in May, down from 14.7% in April,\u00a0as\u00a0the\u00a0economy added 2.5 million jobs.\u00a0 The surprise sent markets soaring Friday, with the S&P 500, Dow Jones Industrial Average, and NASDAQ composite all up\u00a0more than\u00a02% for the day.\u00a0 Much of the gain came from leisure and hospitality businesses which added back more than 1.2 million workers.2\u00a0 Most of these jobs were restaurant-related, but also included hotels, casinos, and amusement parks.\u00a0 Construction also increases significantly, adding nearly 500 thousand jobs as restrictions around activity eased across the country.\u00a0\n}

While May\u2019s employment gains are certainly encouraging, the US economy still has 20 million fewer people employed compared to February prior to the start of the pandemic.\u00a0 The headline unemployment rate of 13.3% is\u00a0among\u00a0the highest in the post-World War II era, and the \u201cU-6\u201d unemployment rate, which includes the headline rate plus those who have stopped looking for work (discouraged workers) and those who are working part-time for economic reasons, is at 21.2%^{3.\u00a0 While key US equity indices have already made a sharp recovery, it will be important for investors to continue to monitor the progress of the actual economic recovery, particularly the impact on the ability for these workers to get rehired, to pay their housing and debt service obligations, and\u00a0return to\u00a0their long-term spending habits.\u00a0 The impact on US employment of the 2008-2009 financial crisis was shallower than the current recession, but the recovery took many years and arguably had a lasting impact on the financial habits of households who were scarred by losses in income and investments.\u00a0 The COVID-19 recession was one of sharpest in history, and while it\u00a0appears that\u00a0US economic activity\u00a0may have\u00a0bottomed, the pace of the recovery and rehiring of workers will be key to monitor as household spending drives nearly two-thirds of US gross domestic product.\u00a0″},”source”:{“query”:{“name”:””},”props”:{}}},{“type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”content”:”}

Chart 2: May Change in US Payrolls by Industry”}},{“type”:”image”,”props”:{“margin”:”default”,”image_svg_color”:”emphasis”,”image”:”wp-content\/uploads\/sites\/8\/2020\/06\/may-change-in-us-payrolls-by-industry_6.8.png”}},{“type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”text_size”:”small”,”content”:”

Source: Bureau of Labor Statistics, CNBC”,”margin_remove_top”:false,”margin_remove_bottom”:false}},{“type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”content”:”

Key Economic Releases This Week”}},{“type”:”image”,”props”:{“margin”:”default”,”image_svg_color”:”emphasis”,”image”:”wp-content\/uploads\/sites\/8\/2020\/06\/economic-releases_6.8.png”}},{“type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”text_size”:”small”,”content”:”

Source: Marketwatch”}},{“type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”content”:”

Asset Class Returns”}},{“type”:”image”,”props”:{“margin”:”default”,”image_svg_color”:”emphasis”,”image”:”wp-content\/uploads\/sites\/8\/2020\/06\/asset-class-returns_6.8.png”}},{“type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”text_size”:”small”,”content”:”

Source: Morningstar, Bloomberg, US Treasury (total returns shown gross of fees)
As of June 5, 2020″}},{“type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”content”:”

Prices & Interest Rates”,”position_bottom”:”0″}},{“type”:”image”,”props”:{“margin”:”default”,”image_svg_color”:”emphasis”,”image”:”wp-content\/uploads\/sites\/8\/2020\/06\/prices-and-interest-rates_6.8.png”}},{“type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”text_size”:”small”,”content”:”

Source: Morningstar, Bloomberg, US Treasury (total returns shown gross of fees)
As of June 5, 2020″}},{“type”:”html”,”props”:{“content”:”

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Past performance may not be representative of future results. \u202fAll investments are subject to loss.\u202f Forecasts regarding the market or economy are subject to a wide range of possible outcomes. \u202fThe views presented in this market update may prove to be inaccurate for a variety of factors.\u202f These views are as of the date listed above and are subject to change based on changes in fundamental economic or market-related data. \u202fPlease contact your Financial Advisor in order to complete an updated risk assessment to ensure that your investment allocation is appropriate.\u202f\u202f\u00a0″,”text_align”:”left”,”text_size”:”small”,”text_color”:”muted”}}]}]}]}],”version”:”2.2.2″} –>