This Week's Market Moves | June 15, 2020

The S&P 500 index tumbled 4.7% this week, as concerns about a possible second wave of coronavirus infections and the Fed’s downbeat economic outlook dashed hopes of a quick, V-shaped recovery. Here are some other insights on the market this week:

The S&P 500’s impressive climb back into positive territory came to a screeching halt this week. This should not be too surprising, considering that more than 95% of the companies in the S&P 500 were trading above their 50-day moving average, signaling that stocks were ripe for a correction. The market’s hopes of a quick, V-shaped recovery were diminished by concerns about the potential for a second wave of coronavirus infections, along with a gloomy economic outlook from the Fed, and caused the S&P 500 to suffer its worst weekly rout since the height of the pandemic. The sell-off was broad-based, with all of the 11 S&P 500 sectors finishing lower this week.

Treasury yields reversed course this week, with the 10-year Treasury note falling 20 basis points to 0.71%, as risk sentiment soured. The 30-year Treasury yield also declined 23 basis points to 1.45%. Concerns about a prolonged downturn, along with Fed Chair Powell’s commitment to keep rates low and maintain its current pace of asset purchases, helped fuel the decline in bond yields.

At their policy meeting this week, Federal officials left the fed funds target rate unchanged in a range of 0.0% to 0.25%, signaling that rates would remain near zero through 2022. While policymakers have been successful in dampening market volatility, the Central Bank still believes they have more work to do to support a sustained economic recovery, as the risks remained skewed to the downside. The decision to use yield curve controls still remains under discussion.

The National Bureau of Economic Research (NBER) has officially determined that the U.S. economy fell into a recession in February 2020, a full month before the coronavirus shutdowns swept across the nation. This comes as no surprise to the market, given the sharp decline in growth and surge in unemployment in the first quarter. With the economy showing tentative signs of improvement, this may turn out to be one of the shortest recessions on record.

The CARES Act greatly expanded unemployment benefits to those impacted by the coronavirus. However, one of the key provisions, which included an additional $600 in weekly unemployment benefits, is set to expire at the end of July. This provision was harshly criticized by some politicians, as many Americans are receiving more money on unemployment than they would from their jobs. Lawmakers are actively discussing what stimulus, if any, should replace it. Despite the increase in jobs last month, the magnitude of the jobs lost since the start of the pandemic suggests further stimulus may be necessary.

It should come as no surprise that job openings have vanished in the current market environment. The latest JOLTS report, which measures job vacancies, confirmed that the downward trend continues, with the series falling to its lowest level since December 2014. This is notable because until a few months ago, the number of job openings far exceeded the available pool of workers. Based on today’s report, there are now four workers competing for every available job.

Over 1.5 million Americans filed for unemployment benefits this week, bringing the three-month total to just over 44 million. Continuing claims, which capture those currently receiving benefits, edged lower to 20.9 million. On a bright note, the number of Americans filing for unemployment has consistently fallen since the last week of March. However, the magnitude of the weekly filings is more than double the worst weekly period during the Great Recession.

U.S. consumer prices slumped for the third month in a row, as the worst economic downturn since the Great Depression continues to sap demand. Consumer prices have risen a paltry 0.1% over the last 12 months, a sharp decline from the 2.4% yearly pace reported a few months ago. The core measure, which includes volatile food and energy prices, also fell to 1.2% on a year-over-year basis. This is the first time the series declined three months in a row since the government started compiling the data in 1957. Of note, the Bureau of Labor Statistics cautions their data collection efforts have been impacted by the coronavirus closures, causing some prices to be temporarily unavailable or imputed.

Nationwide protests have taken center stage, largely overshadowing the market’s hyper-focus on the ongoing coronavirus pandemic. But top scientists are warning that the pandemic is by no means over. While some hot spots, like New York City and Chicago, have seen a significant reduction in the number of coronavirus cases, new cases have popped up in Arizona, Texas, and the Carolinas. There has also been a record number of new infections across the globe in recent weeks.

Indices: Core Bond: Bloomberg Barclays U.S. Aggregate Index, High Yield: ICE BofA US High Yield, Large Value: Russell 1000 Value Index, Large Blend: S&P 500 Index, Large Growth: Russell 1000 Growth, Emerging Markets, MSCI EM NR USD, Foreign Equities: MSCI ACWI Ex USA NR USD, REITs: FTSE NAREIT All Equity, Small Blend: Russell 2000

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Note that this article was published on June 15, 2020. Data represented is as of the publication date. The information contained herein has been obtained from sources that are believed to be reliable. However, Cammack Retirement Group does not independently verify the accuracy of this information.

Note: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice. Opinions expressed are those of the author, and do not necessarily represent the opinions of Cammack Retirement Group.

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