Conway’s QuickTake: Week of May 25, 2020


Here’s What Happened Last Week:

U.S. Equities
U.S. Equities provided strong returns through the week as the S&P 500 Index advanced by 3.3% and touched its highest level since early March on Wednesday. Two main catalysts contributed to the strong week – progress on a vaccine for coronavirus and statements from the Federal Reserve promising to support the economy in whatever fashion is necessary. Moderna (MRNA) announced its vaccine candidate showed promising early results and AstraZeneca (AZN) is now involved in a rapid vaccine-production project funded with $1.2 billion provided by the U.S. Department of Health and Human Services. Most sectors in the S&P 500 had sizable positive returns due to the positive news, led by industrials (+7.3%) and energy (+6.8%). The only lagging sector was health care (-0.7%). Elsewhere, small-cap stocks beat their large-cap peers, and value outpaced growth as measured by their respective Russell indices. Interestingly the steep decline of the Russell 2000 Value Index from last week reversed, and the index rose by 9.1%.

Jerome Powell made several strong statements last week, implying the Fed can provide more support to stabilize the economy and markets Following his remarks was Thursday’s testimony in which Treasury Secretary Steven Mnuchin stated the White House will wait and see how the existing stimuli affect the economy before taking the next step(s). An additional 2.4 million Americans filed initial jobless claims, indicating the pandemic’s effects on the labor market have not dissipated just yet, though claims were lower than the prior week. Some encouraging data included IHS Markit’s services sector report – which rose unexpectedly – and better-than-consensus existing home sales in April. The U.S.-China feud continued to escalate with the U.S. passing a bill preventing some Chinese companies from listing shares on U.S. exchanges.

Source: iStock 2020

International Equities
International Equities were mostly up last week, with some regions performing better than others. European equity markets rose, driven by hopes of easing lockdowns and the prospect of an economic recovery. Developed markets outperformed emerging markets last week as indicated by the MSCI EAFE Index (+3.0%) and MSCI EM Index (+0.5%). Japanese stocks benefitted after the Bank of Japan held an impromptu monetary policy meeting to discuss possible additional funding for small and medium-sized companies facing insolvency concerns. Chinese equities rose through Thursday but plummeted on Friday to end the week down 2.6%. This decline is related to the existing controversial trade-war issues China is facing with the U.S. as well as the announcement of an enhanced national legislation on Hong Kong, which the U.S. strongly disapproves of.

Credit Markets
Credit Markets provided small modest gains supported by positive net fund flows and increased levels of demand. The 10-year yield spiked briefly on Monday as investors digested upbeat vaccine-related reports but slowly moved lower to end the week at 0.66%, roughly unchanged from the week prior. In fixed income sectors, municipals rose and outperformed Treasuries while investment-grade and high-yield corporate bonds also gained ground as demand from overseas investors and category inflows increased. Reflective of these actions, the Bloomberg Barclays U.S. Aggregate Bond Index increased by 0.4% for the week.

Looking ahead…
Tuesday, May 26, 2020
•US – S&P/Case-Shiller Home Price change, New Home Sales
Thursday, May 28, 2020
•Euro Area – Business Confidence, Economic Sentiment
•US – Durable Goods Orders, Q1 GDP Growth Rate (Second Estimate)
Friday, May 29, 2020
•Japan – Consumer Confidence
•France – Q1 GDP Growth Rate (Final)
•Italy – Q1 GDP Growth Rate (Final)
•US – Personal Spending, Personal Income figures

Resource of the Week:
If you have ever had to decipher a squiggly word and type it into a website as part of the sign-in process, chances are you have used the brilliant invention created by Luis von Ahn. This episode of How I Built This with Guy Raz features a conversation with Luis, the founder of reCAPTCHA, a software that enforces human interaction and verification methods instead of a computer, and of Duolingo, a popular language-learning system.

Sources: Trading Economics, The WSJ, T. Rowe Price Global Markets Weekly Update

Data in this report is obtained from sources which we believe to be reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. It is provided for your information and guidance and is not intended as specific advice and doesn’t not constitute an offer to sell securities. Consult your financial professional before making any investment decision. Past performance is no guarantee of future results. Diversification/asset allocation does not ensure a profit or guarantee against a loss. The Wilshire 5000 Total Market Index measures the performance of all U.S.-headquartered equity securities with readily available price data. The Standard & Poor’s 500 Index (S&P 500) is an unmanaged group of securities considered to be representative of the stock market. The Russell 2000 Index is a market-cap weighted index comprised of the smallest 2,000 companies within the Russell 3000 Index, a larger market-cap index made up of the largest 3,000 publicly traded companies in the U.S., nearly 98% of the investable U.S. stock market. The MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index designed to measure the equity market performance of developed markets, excluding the U.S. and Canada. The MSCI Europe Index captures large- and mid-cap representation across 15 Developed Markets countries in Europe, covering approximately 85% of the free float-adjusted market capitalization across the European Developed Markets equity universe. The MSCI Emerging Markets (EM) Index captures large- and mid-cap representation across 26 Emerging Markets countries, covering approximately 85% of the free float-adjusted market capitalization in each country. The MSCI Japan Index captures large- and mid-cap representation of the Japanese market, covering approximately 85% of the free float-adjusted market capitalization in Japan. The Bloomberg Barclays U.S. Aggregate Bond Index is a market capitalization-weighted index comprising Treasury securities, Government agency bonds, mortgage backed bonds, corporate bonds, and some foreign bonds traded in the U.S. The Bloomberg Barclays Global Aggregate Ex U.S. Index measures the performance of global investment grade fixed-rate debt markets that excludes USD-denominated securities. The Bloomberg Barclays Municipal Bond Index covers the U.S. dollar-denominated long-term tax-exempt bond market. Created by the Chicago Board Options Exchange (CBOE), the Volatility Index, or VIX, is a real-time market index that represents the market’s expectation of 30-day forward-looking volatility. Data in this newsletter is obtained from sources which we, and our suppliers believe to be reliable, but we do not warrant or guarantee the timelines or accuracy of this information. Consult your financial professional before making any investment decision. Past performance is no guarantee of future results. Diversification/asset allocation does not ensure a profit or guarantee against a loss.