Weekly Market Commentary

July 6, 2020

 

The Markets

What a quarter!

Who could have guessed a global pandemic would produce positive stock market returns? Near the end of last quarter (March 23), the Standard & Poor’s 500 Index was down 30.75 percent for the year, and it looked like 2020 was going to be a disappointing year for many investors.

Since then, the S&P 500 has gained a lot of it back. The Dow Jones Industrial Average also did well, delivering its second-best quarterly showing since 1938. The Nasdaq Composite finished the quarter in positive territory.

A variety of factors contributed to the exceptional performance of U.S. stock markets during the quarter:

  • The Federal Reserve maintained a supportive monetary policy stance. It has been buying Treasuries and mortgage-backed securities and funding emergency loans.
  • The $2 trillion emergency spending package passed by Congress had an impact. Stimulus checks, enhanced unemployment benefits, and emergency loans plumped personal income and supported businesses through second quarter closures.
  • Positive data suggested economic recovery might be underway. In the United States, unemployment numbers improved, although they remained at historically high levels. Factory activity in China hit a three-month high, and the June Purchasing Manager’s Index in the United States came in above expectations.

Supportive central bank policies helped global economies during the second quarter, too. Stock markets in many regions, including Europe, China, and Japan, finished the second quarter higher. Positive economic data, optimism about coronavirus treatments, and hopes for a vaccine helped push markets higher.

It is possible consumer confidence in the United States will be dented by the recent upsurge in coronavirus cases. Last week, the spread of COVID-19 was gaining momentum again. Every day, from Wednesday through Saturday, more than 50,000 new cases were confirmed.

Many states and cities implemented new measures to slow the spread. One of the most important may be mask-wearing.

Despite the numerical uncertainty research suggests that the economic benefit from a face mask mandate and increased face mask usage could be sizable.

 

Let’s all go to the drive-in!

Americans’ search for socially-distanced entertainment is leading them to drive-in theaters. Demand has been strong enough that pop up drive-ins are opening in sports venues, arenas, and fairgrounds across the United States.

In the 1950s, there were more than 4,000 drive-in theaters in the United States. By October 2019, the number had dwindled to 305. More than one-third were concentrated in Pennsylvania, New York, Ohio, Indiana, and California.

Outdoor movie theaters tend to operate on razor-thin margins, reported The Washington Post. “…Drive-ins in the 21st century have flourished in more working-class and rural areas where land is cheaper and the venue appeals to families seeking to pile in the car for a night of inexpensive entertainment.”

Now, we’re seeing a resurgence of interest in outdoor movie venues. The sponsor of the Tribeca Film Festival has partnered with big box stores. They’ll be bringing “…the big screen to America’s backyard this summer…,” by offering movies in store parking lots.

So, set up the lawn chairs or deck out your cargo space with pillows and blankets, and settle in to watch some movies from a safe social distance in the great outdoors.

 

Focus On The Positive

“Outside of a dog, a book is a man’s best friend. Inside of a dog it’s too dark to read.” –Groucho Marx, Comedian

 

Best regards,

Bill Spalding