Weekly Market Digest: Stocks Continue to Rally | Personal Capital
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Home>Daily Capital>Investing & Markets>Weekly Market Digest: Stocks Continue to Rally

Weekly Market Digest: Stocks Continue to Rally

The “re-opening” market rebound continued with stocks marching higher, punctuated with a rally Friday fueled by a much stronger than expected jobs report. A record 2.5 million jobs were added in May, in comparison to a median projection for a loss of 7.5 million. Unemployment fell to 13.3%, still extremely elevated but much below expectations above 20%.

Weekly Returns

S&P 500: 3,194 (+4.8%)
FTSE All-World ex-US (VEU): (+7.4%)
US 10 Year Treasury Yield: 0.90% (+0.24)
Gold: $1,684 (-2.7%)
EUR/USD: $1.129 (+1.7%)

Major Events

  • Monday – The ISM manufacturing index rose to 43.1, up from 41.5 in April which was the lowest since 2009.
  • Tuesday – Despite predictions that home values may fall this year, prices rose 5.4% in April and inventories for entry level homes declined 25% according to CoreLogic.
  • Wednesday – The Trump administration threatened to ban mainland Chinese flights from flying to and from the US.
  • Wednesday – The S&P 500 completed its best 50-day period ever according to LPL Financial.
  • Thursday – Airline stocks rallies on indications of stronger than expected demand for travel and announcements of faster than expected increases in flight schedules.
  • Friday – Employers added 2.5 million jobs, shattering expectations and providing hope for a quicker than expected economic recovery from coronavirus shut-downs.

Our Take

With this week’s rally, the U.S. stock market is nearly back to even for the year. Small caps (IWM) and international stocks (VEU) remain down nearly 10%, but all things considered it has been a remarkable bounce-back for equities. Less than two months ago many felt the market and the economy were sinking into the abyss.

The reality is, even as some parts of life return to normal, it is not. The economy is not fully open, and so it is natural that many are struggling to connect the dots between the market and the economy. A bullish view looks at a rapid recovery of economic activity joining forces with massive monetary and fiscal stimulus along with short-term interest rates back at zero. The bearish case says there is no way the world is as good as it was at the beginning of the year. Only time will tell who is right, but our guess is most who tried to time the market over the last few months are now in an awkward spot.

Another interesting trend this week was a continued swing from high momentum to more beaten up and unloved stocks. Value significantly outperformed growth, small outperformed big, and momentum ETFs lagged. It is too soon to tell if this will last or simply be a counter-trend rally, but we note that prior to April the outperformance of the biggest stocks compared to small cap, and of growth compared to value had been extreme (as were valuation gaps). We expect there will be massive reversion to the mean at some point. Maybe it has started.

The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. You should consult a qualified legal or tax professional regarding your specific situation. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.

Any reference to the advisory services refers to Personal Capital Advisors Corporation, a subsidiary of Personal Capital. Personal Capital Advisors Corporation is an investment adviser registered with the Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training nor does it imply endorsement by the SEC.

Craig Birk leads the Personal Capital Advisors Investment Committee and serves as Chief Investment Officer. His focus is translating improvements in technology into better financial lives. Craig has been widely quoted in the Wall Street Journal, Bloomberg, CNN Money, the Washington Post and elsewhere. Prior to Personal Capital Advisors, he was a leader within the portfolio management team at Fisher Investments, helping assets under management grow from $1.5 billion to over $40 billion. Craig graduated from the University of California at San Diego and has earned the Certified Financial Planner® designation.
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