Equity markets continued to move higher this week as the re-opening process continues. The S&P 500 added 2.9% while foreign equities were especially strong. Emerging markets gained 6.6% and foreign developed jumped 6.3%. The Bloomberg Barclays Aggregate Bond Index was flat on the week as Treasury yields moved higher but were offset by strong gains in corporate bonds. The 30-year Treasury yields are at a two-month high at just over 1.5%.

Oil prices have moved up to $37 per barrel following the dramatic move to negative prices. And, as so often is the case with markets, the time to buy is at these extreme levels. The S&P 500 energy sector has returned 26% since the negative prices on April 20. This is almost double the return on the NASDAQ, which is often cited for strong performance off the March lows. Precious metals have also done well as prices have moved higher amid all the stimulus activity. The Solactive Global Silver Miners Index is up more than 60% from the March lows.

The European Central Bank upped their stimulus programs today by increasing and extending the duration of their corporate bond buying program. This comes on the heels of a large fiscal stimulus package announced by Germany this week which was treated favorably by the market. If the historically budget-focused European countries open to fiscal stimulus it would be a tailwind to economic activity. It could also be a big boost to global equity markets if there is widespread global fiscal stimulus.

Jobless claims continue to be elevated but have come off their extreme readings. Continuing claims remain north of $20 million and the expectation is that it will be many quarters before employment returns to previous levels. Personal income was up 10.5% in April. It was the largest jump on record in a series that dates to the 1940’s. How is it possible for income to jump amid one of the greatest economic contractions of all-time? Transfer payments of nearly $3 trillion filled the hole in wages. This is a major reason that equity prices have been so strong. Those unemployed have thus far had their lost wages replaced by government checks and their investments have moved higher which aids in confidence and spending patterns. However, equity markets look forward and the outlook is cloudy. The bonus unemployment benefit is set to expire at the end of July whereas additional stimulus checks face a growing political divide on their renewal terms.

Source: BTC Capital Management, Bloomberg LP, Ibbotson Associates, FactSet.
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