Overview: U.S. stock markets rallied on the hope that parts of the U.S. economy may begin to re-open soon. Investor optimism outweighed news of the coronavirus economic impact, dismal economic data, and weak first-quarter earnings. The S&P 500 ended 3.0% higher for the week, with international developed stocks (MSCI EAFE) up about 1.5%. Interest rates declined, with yields on the 2-year and 10-year Treasury falling to 0.20% and 0.66% respectively. Despite a historic OPEC+ agreement to cut production, oil prices continued to trade at two-decade lows amidst a supply glut and continued demand-side shock. The U.S. reported its largest weekly inventory build on record at 19 MM barrels (bbls) last week, and WTI crude oil continued its freefall in price, trading below $11.50/bbl. as of morning on Monday, April 20. In economic data, first-quarter Chinese real GDP came in at -6.8% year-over-year, marking its first negative yearly growth in decades. In the U.S., March U.S. retail sales were down by 8.7%, the biggest decline on record. The drag from hard-hit businesses included apparel (-50%), furniture (-27%), and restaurants and bars (-27%), which outweighed the surge for grocery stores (+27%) and healthcare businesses (+4%).
Looking Ahead: The recent rally in stock markets suggests investors have been more focused on the spread of the coronavirus, and less focused on fundamental economic and earnings data. This is evidenced by the correlation between the S&P 500 rally and the slowing growth in virus cases since the market low on March 23. This may suggest that investors are focusing less on the bad fundamental data that is expected over the next few months and more on what comes after the pandemic passes.
Weekly Returns and Data
Sources: Goldman Sachs Asset Management, JP Morgan Asset Management, Barron’s
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