Markets “In A Nutshell” for May 19, 2020

Markets “In a Nutshell” for May 19, 2020

Investment Week at a Glance

Stocks finished down for the week.  The Dow Jones Industrial Average was down 2.65%, the S&P 500 fell 2.26%, the New York Stock Exchange Composite (2,000 stocks) fell 3.58% and the average investors index (Value Line Index) was down 6.01%.  Foreign stocks (DJ Global ex U.S.) were down 2.59%.  Bond prices were higher for the week, with the 10-year U.S. Treasury ending the week 5 basis points lower at 0.64%.  (Data source: Wall Street Journal)

Stocks Down on Uncertainty

The optimism in the air from the past couple of weeks was absent from markets this week as government health and economic officials provided a sobering outlook for the future of the country. Dr. Anthony Fauci highlighted the risks of opening up too soon and cautioned state governments to be diligent in easing into their respective re-opening’s. Federal Reserve Chairman Jerome Powell focused on the damage already done to the economy and stressed that more needed to be done to heal the country, even after the record amounts of stimulus already in place. The damage Powell was speaking of was summed up in a horrific drop of 16% in consumer spending in April. Responsible for two thirds of the economy, consumer spending is critical to getting the country back on track and will certainly be telling of the changes in people’s behavior once the economy is open again.  (Barron’s)

Value Stocks Gaining Attention

In what has been an underperforming strategy for almost a decade, value stocks, which tend to have lower profitability than its growth peers, may be heading for a sharp rebound coming out of what is already one of the deepest recessions in history. To almost everyone’s surprise, growth stocks, led by technology stocks, have outperformed value stocks in the past decade and through this recession, with the Nasdaq actually positive for the year as of Friday. In a Barron’s article this week, value stocks are the ones highlighted as a potential asset class that could outperform the market in the coming rebound. The sharp drop in stocks in the past couple of months has created multiple opportunities to invest at lower prices and the article argues that the most dramatic of those opportunities can be found in value stocks, which are trading at some of the cheapest values ever. While it could be many more months before we actually get to experience any substantial rebound in appetite for stocks, value may have found its opportunity to shine once the time comes. (Barron’s)

Quiz:

With markets falling almost in unison last week, what was the one sector in the S&P 500 that was positive last week?

1.   Consumer Staples
2.   Health Care
3.   Technology
4.   Utilities

 

 

Answer below.

 

 

 

 

Have a Great Week!

 

 

 

 

 

 

 

 

 

Answer:

2.   Health Care was the only positive sector in the S&P 500 last week, rising 1.06% (Barron’s).