June – July 2020

U.S. Economic and Market Highlights

The Economy:

  • Most analysts predict that the second quarter 2020 will be the low point for the economy as Gross Domestic Product (GDP) is expected to have a second half recovery as global economies reopen.
  • GDP, in the U.S., experienced a drop of 9.5% in the second quarter which was the steepest drop on record, compared to the same quarter a year ago.
  • According to the median Bloomberg consensus forecast, U.S. GDP is expected to contract by 5.6% in all of 2020. Bloomberg consensus economists’ expectations project the euro zone and Japanese economies to contract by 8.0% and 4.9%, respectively.
  • The Consumer Confidence Index is well below its pre-pandemic levels, even though June’s number marks a significant improvement from May. It is too early to say consumers are ready to start spending like they were before the pandemic, especially as some states either halted or reversed their planned business reopening schedules due to flare-ups of COVID-19 cases.
  • The University of Michigan’s Consumer Sentiment Index reading of 73.2 in July was below economists’ projection for 79.0 and reversed most of the prior month’s gain. Declining consumer optimism, in the U.S., stems from the rise in unemployment claims last month, for the first time in four months and the potential for an extended recovery.
  • Shortly after the COVID-19 outbreak, Central Banks around the world announced financing programs to provide monetary support to help stabilize, and stimulate, the economy, individuals, businesses, and capital markets. Now, many Governments are moving to extend the support programs.  


Fixed Income:

  • Increased uncertainty drove long-term interest rates lower, to record lows in the U.S. just over 0.50% on the Ten-year Treasury Note, as investors seek a safe-haven from short-term market volatility.
  • Lower yields helped bond prices on Government, mortgage agencies, and other securitized debt, while some investment-grade corporate bonds weakened, on the negative news, after several months of strong performance.
  • As of June 30, 2020, most bond market indices were sharply positive year to date, while stock market returns were up dramatically in the second quarter, stock prices were still clawing back negative returns from the first quarter’s bear market decline. (See the Market Tracker below for related statistics.)


  • The stock market experienced the strongest bear market rally ever in the second quarter, driven by large technology stocks, which made up a disproportionate amount of the returns. In the first six months of 2020, the average return of the five large tech stocks was 24.1% compared to a decline of 3.1% for the rest of the S&P 500.
  • Large-cap value outperformed large-cap growth in the second quarter, while growth has outperformed year-to-date and over most of the recent years. Valuations (price/earnings ratio) on growth stocks are at 94% of their historical high and value stocks are at 64% of their historical high. All industry sectors were positive in the second quarter.
  • Volatility is lower than it was upon the initial COVID-19 outbreak, but still remains elevated. Equity market returns will likely remain volatile over the coming months with the resurgence of COVID-19, the upcoming U.S. election, and rising tensions between the U.S. and China.

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.