Stocks Claw Back Coronavirus-Related Losses in May

May 2020 Market Review and Commentary from Personal Capital’s Chief Investment Officer, Craig Birk, CFP®

Stocks continued to claw back coronavirus related losses in May as shut-down policies around the globe eased and investors took an optimistic view of economic recovery. Bonds also advanced amid support from the Fed. In contrast to asset price gains, the mountain of unemployment claims continued to build, passing the 40 million mark. On a somewhat more positive note, continuing claims ended the month on a downward trajectory at 21 million.

Many are citing a disconnect between the hard-hit economy and now only moderately hit stock market. Equity prices appear to be banking on the hope that there will be no second wave of the virus, or if there is that people will not accept a second major shutdown. Additionally, while some large companies have been severely crippled, for many the crisis has provided an opportunity to refocus and enhance productivity.

Meanwhile the Fed has ensured credit will be readily and cheaply available and pushed interest rates near zero, boosting stocks appeal relative to bonds. The pain has been disproportionately felt by small businesses and employees. Only time will tell if the V shaped market recovery is lasting, and as always there are good arguments to be made on both sides.

On Memorial Day, George Floyd was killed by a police officer while handcuffed and pinned to the ground, sparking protest around the country, as well as riots and looting in some areas. The situation marks another dark chapter in what has been a bleak year. We are hopeful the nation will emerge with positive changes and less division amidst this truly challenging year.

Tensions with China resurfaced as the country took steps to assert more control over Hong Kong while the Trump administration alluded to the idea that the virus was created nefariously. A collapse of the existing trade agreement would be a blow to stocks, but so far President Trump has not pushed too hard and is likely to be cautious around anything that could slow economic recovery ahead of the election.