Overview: Stocks gained across the globe last week on optimism around a quick global economic recovery as lockdown measures began to ease. The S&P 500 Index ended the week up 3.0% despite renewed tensions in U.S.-China relations. International stocks fared even better, with the MSCI EAFE Index up 5.1% for the week. Stocks in Europe were aided by the European Commission (EU), which announced a package of loans and grants totaling up to $823 billion. In bonds, yields on credit bonds improved on COVID-19 vaccine optimism. Risk premiums in bonds continued to compress as more companies have made progress in clinical trials. Meanwhile, U.S. Treasury yields have continued to remain near record lows and have traded in a narrow yield range, with the 10-year Treasury note ending the week at a yield of 0.65%.
In economic news, U.S. jobless claims continued to decline last week at 2.1 million for the week prior. Since mid-March, jobs lost have now surpassed 40 million. This week we get the jobs report on Friday, where the consensus is for a 19.8% headline unemployment rate for the month of May.
Looking ahead: For the past three months or so, coronavirus news has dominated our collective attention. But the longer it goes on, the less it becomes “news” and the more it becomes part of life, allowing other factors to begin to gain attention. For example, tensions between the U.S. and China are coming to the forefront, and not only over contentions over the source of the coronavirus. China’s move to exert more control over Hong Kong has largely been condemned by the global community; and the trade war between the U.S. and China could escalate. At this point, in a normal election year, we’d be inundated with campaign rhetoric and spin. The virus may delay campaigns, but eventually, they will heat up. We expect election volume to turn way up in the months ahead with expected short-term impacts and volatility in the markets.
Weekly Returns and Data
Sources: Goldman Sachs Asset Management, Braver Capital
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