May – June 2020

U.S. Economic and Market Highlights

The Economy:

  • Improving economic data has helped stocks continue to climb despite daily new COVID-19 cases in the U.S.
  • The U.S. labor market added 4.8 million jobs in June versus economists’ expectation for 2.9 million, while the unemployment rate fell to 11.1% in June from 13.3% in May.
  • Strong rehiring activity was driven by many U.S. states gradually reopening their economies in the first half of June.
  • Approximately 60% of workers have been negatively impacted by coronavirus due to reduced income, temporary or permanently lay-offs, closed businesses, or reduced hours.
  • U.S. Consumer Confidence rose to 98.1, up from 85.9 in May, due to loosened social distancing restrictions and improvements in the labor market.
  • ISM Manufacturing Index reported better-than-expected results with a reading of 52.6, marking a significant jump from 43.1 in May. Readings above 50 indicate that many businesses are beginning to see an expansion of manufacturing activity.
  • The application deadline for the Paycheck Protection Program was extended. Over $130 billion is still available in the program.

Fixed Income

  • Treasuries and central banks around the world continue with unprecedented stimulus including  unlimited buying of Treasury, mortgage-backed securities, investment grade corporate, high yield corporate, and municipal bonds to support the bond markets.
  • Concerns increase about the rising level of government debt and the budget deficit given the large relief stimulus packages. U.S. government debt is higher than ever at 160% of GDP, but still lower than Japan’s 200%.
  • There are a record number of “fallen angels” YTD with many companies being reduced from investment grade to high yield, or junk, bond status, especially in the airline, travel, hotel and leisure, and oil and gas sectors.
  • Distressed bonds and default rates are increasing to their worst levels since the global financial crisis in 2009.
  • Private Credit opportunities are growing as economic pressures increase on small and mid-sized businesses. Middle market loans offer higher yields and limited correlation relative to other fixed income and public market asset classes.


  • Equities are a leading indicator. They were first to fall and first to rebound. The S&P 500 recorded its best quarter since 1998. (See Market Tracker below.)
  • Technology companies outperformed other sectors. Growth companies continue to outperform value companies during the coronavirus outbreak. The spread between growth stock valuations and value stock valuations is near Dot-com levels.
  • As a result of the above, growth stocks may offer below market returns as the economy returns to normal. Value stocks are attractive at lower prices and offer higher yields, which are especially attractive in low rate environments.
  • Each economic downturn is unique and it is still too early to determine how this recovery will ultimately play out.
  • The current market recovery is impressive. But we may not be through the worst. Bear markets usually have “false” rallies prior to testing market-cycle lows. Volatility is expected to remain elevated for a while.
  • Private equity experienced less significant pullbacks (factoring in lagging performance reports) with quicker recoveries as compared to public markets over the most recent economic downturns.
  • The best private equity vintages over the past 25 years have come in economic downturns, with high median returns as well as significant relative outperformance over public equities.
  • Infrastructure is expected to be less sensitive to broader market and economic movements. The need for infrastructure investments globally continues to drive demand despite the market downturn.

This communication was prepared for informational purposes only and is not an offer to buy or sell or a solicitation of an offer to buy or sell any security/instrument or to participate in any trading strategy. Past performance is not indicative of future results.