Market Update - June 8, 2020Submitted by Jodi Vleck , Beta Wealth Group on June 8th, 2020
For the week ended June 6th, U.S. stocks gained sharply driven partly by significantly better-than-expected economic data and continued re-openings nationwide, with few notable spikes in reinfections. Specifically, the May jobs report was strong, with the US economy adding 2.5 million jobs (vs. consensus estimates for 8 million in job losses) and the unemployment rate was significantly lower than the expected 20%. By sector, energy equities were the leaders, gaining over 15% with broad-based production cuts helping normalize oil prices, followed by cyclical industries such as financials and industrials up over 10%; in contrast, defensive sectors such as health care, staples and utilities experienced modest gains.
Foreign markets outperformed U.S. markets for the week both due to the easing of lockdown restrictions and an influx of fresh government stimulus slated to aid in the the recovery, such as the doubling in the size of the European Central Bank’s (ECB) emergency pandemic bond purchase program to 1.3 trillion Euros, and additional fiscal stimulus from the German government. Emerging markets outperformed developed markets in U.S. dollar terms especially in regions such as Latin America, where there were growing protests and social unrest in Brazil due to rising Coronavirus infection rates.
U.S. treasury bonds experienced a relatively rougher week as interest rates ticked up sharply Friday in response to the robust employment report. However, high yield corporates and bank loans bucked the trend with positive returns, especially with high yield spreads having tightened sharply since late March. Foreign developed and emerging market bonds both gained ground, largely due to a return to risk-on sentiment and the benefit of a weaker U.S. dollar.
Finally, commodities gained ground last week due partly to a weaker dollar and a sentiment boost toward pro-cyclical assets such as energy and industrial metals, while precious metals lost ground. The price of crude oil rose by another 10%+ to just under $40/barrel upon news of further production cuts by OPEC nations, and Chinese imports growth.