June 1, 2020

Good morning,

As hopes rise with the (at least partial) reopening of many local economies, so have the U.S. equity markets.  Last week’s gains powered the domestic stock markets to their second consecutive month of solid performance.  For the month of May, the Dow, S&P 500 and the NASDAQ gained 4.3%, 4.5% and 6.8%, respectively.

June will be a pivotal month for the U.S. stock markets.  Following the bear market which began February 20 and hit its low on March 23, equities have been on a slow but steady climb upward:

While the stock markets did not experience the classic “V” pattern we saw at the end of 2018 and beginning of 2019, many market watchers did hope for more of a “U” shaped recovery.  What makes June so important is that it is the last month of a calendar quarter that is expected to generate a substantially negative gross domestic product (GDP).  This being the second consecutive month of negative GDP, the U.S. economy will be in a technical, “event driven” recession.

Since the stock market is a forward-looking economic indicator, it will be good news for the markets if their trajectory over the last two months continues into the 3rd quarter of 2020.  It will likely be in the 3rd quarter when we learn of the true economic and financial impact of the COVID -19 pandemic, both through corporate earnings and GDP.