The Major Markets ended mixed as the domestic markets closed slightly lower on the week while the MSCI World and Emerging Market indices closed in positive territory.
The greatest gains occurred the in emerging markets as all the MSCI emerging market countries closed higher, many reporting double digit gains. The gains were fueled in part by a weaker dollar as the dollar index fell 1.21% last week.
Thursday marked the close of April and the best monthly return for the S&P 500 since 1987. The monthly gain of 12.68% helped to recoup a lot of the losses for the index. However, as of Friday’s close, the S&P 500 is still down over 12% for the year.
The recovery in the month of April have led some to wonder if the old adage of “Sell in May and stay away, come back again at St. Ledger’s Day” will ring true again this year. The more Americanized version replaces St. Ledger’s Day with Labor Day but both effectively mark the end of Summer.
This phrase comes from the idea that investors experience better market performance in the wintery months of the year from September to April, and less so during the summery months from May to August. There is some truth to this idea but with some notable exceptions. September has historically been the worst monthly performer going back to 1950 and has had the greatest percentage of months with losses. Although, the very non-summery month of February has shown to perform about as bad as the month of August in terms of average performance and percentage of month with a positive return.
Time will tell this year is there is a significant deviation from the historical norm.
The 1st quarter economic reports released so far have continued to show a bleak picture of the overall economy. US GDP contracted by 4.8% in the first quarter. This marks the biggest contraction since Q4 of 2008. The results are especially remarkable considering that many states did not begin to ramp up shelter in place orders until mid-March, when the initial estimates of GDP were still pointing toward a positive 2% rate .
Finally, last week the Federal Reserve held the first press conference since the unscheduled March 15th meeting that included a rate reduction to near zero . During the press conference Chairman Jerome Powell repeated his commitment to maintain an accommodating rate environment and the expansion of the Main Street Lending Program eligibility.
On Friday of this week, we will get our first reading of April’s Employment Situation including an update to the Unemployment Rate. Estimates currently point to a double-digit unemployment rate, but hopefully less than the 25% peak of the Great Depression.
“Share of Mortgage Loans in Forbearance Increases to 7.91%: Mortgage Bankers Association.” MBA, www.mba.org/2020-press-releases/may/share-of-mortgage-loans-in-forbearance-increases-to-791.
JeffCoxCNBCcom. “Powell Says the Federal Reserve Is Not Considering Negative Interest Rates.” CNBC, CNBC, 13 May 2020, www.cnbc.com/2020/05/13/powell-says-the-federal-reserve-is-not-looking-at-negative-interest-rates.html.
The S&P 500® Index is a capitalization index of 500 stock-designed to measure performance of the broad domestic economy through changes in the aggregate market value of stock representing all major industries.
The Dow Jones Industrial Average® (The Dow®), is a price-weighted measure of 30 U.S. blue-chip companies. The index covers all industries except transportation and utilities.
The NASDAQ Composite Index measures all NASDAQ domestic and international based common type stocks listed on The NASDAQ Stock Market. Today the NASDAQ Composite includes over 2,500 companies, more than most other stock market indexes. Because it is so broad-based, the Composite is one of the most widely followed and quoted major market indexes
The MSCI World Index, which is part of The Modern Index Strategy, is a broad global equity benchmark that represents large and mid-cap equity performance across 23 developed markets countries. It covers approximately 85% of the free float-adjusted market capitalization in each country and MSCI World benchmark does not offer exposure to emerging markets.
The MSCI Emerging Markets (EM) Index is designed to represent the performance of large- and mid-cap securities in 24 Emerging Markets countries of the Americas, Europe, the Middle East, Africa and Asia. As of December 2017 it had more than 830 constituents and covered approximately 85% of the free float-adjusted market capitalization in each country.
The S&P GSCI Crude Oil index provides investors with a reliable and publicly available benchmark for investment performance in the crude oil market.
Companies in the S&P 500 Sector Indices are classified based on the Global Industry Classification Standard (GICS®).