As American businesses began to reopen, the S&P 500 more than completely erased its 19.60% first quarter loss, posting a 20%+ return over the last three months – its best quarterly performance since Q4 1998. Even so, Wall Street optimism remains challenged by deteriorating trade relations with China and the accelerating pace of new U.S. COVID-19 infections in at least 37 states. Increased testing and easing of social distancing policies was bound to reveal more confirmed cases, now surpassing 10 million globally and the World Health Organization warned that the worst is yet to come. While over 120,000 Americans have lost their lives to the contagion, U.S. coronavirus fatalities had fallen to a new daily low of 273 in late June before likely increasing in the coming months.
Equities got a lift from a bevy of improving economic data, including a twelve-point jump in U.S. consumer confidence in June to 98.1, by far the largest monthly increase since October 2011. The forward-looking expectations index jumped to 106.0, back near its 108.1 reading in February before the COVID-19 contagion took hold. Earlier, retail sales surged nearly 18% in May, surpassing projections for a smaller 8% rebound. Additional backstopping in the credit markets by the Federal Reserve also boosted investor sentiment. The central bank augmented it Secondary Market Corporate Credit Facility by beginning to directly buy up to $750B of investment-grade corporate bonds.
- The Dow Industrials gained 18.51% in the second quarter, its best quarter since Q4 1987.
- The tech-heavy Nasdaq Composite surged 30.95% over the last three months, its strongest quarter since Q4 2001.
- Fixed-income credit markets were spurred by stimulus purchases in corporate bond-based ETFs (split 88% in investment-grade and 12% in high yield).
- At quarter end, gold spot prices briefly topped $1,800/oz. for the first time in eight years.
The Quarterly Recap is published by Cetera Investment Management LLC, an SEC registered adviser owned by Cetera Financial Group. Cetera Investment Management provides market perspectives, portfolio guidance, model management, and other investment advice to its affiliated broker-dealers, dually registered broker-dealers and registered investment advisers.
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