July 17, 2020

Financial Markets

  • Global risk assets staged a rapid recovery supported by aggressive policy actions and increasing optimism as cities and states in the U.S. and countries around the world began to lift pandemic related restrictions and shutdowns.
  • Sectors of the U.S. equity market recovered much of the sharp declines from the first quarter. The S&P 500, which was down over 30% at the low point in March, was down only 3% for the year-to-date on June 30.  The Nasdaq Composite index hit multiple new record highs in June boosted by strong performance by information technology and consumer discretionary sector stocks.
  • S. Treasury bond yields were little changed as the Federal Reserve (Fed) reiterated that it intends to keep its federal funds rate near 0% into 2022. Non-government bond prices recovered supported by the Fed’s bond-buying programs.  Investment-grade corporate bond yields fell to historic lows during the quarter.
  • Oil prices rose after major production cuts and demand gradually increased as shutdown restrictions eased.

Overview of the Economy

  • Economic data releases showed signs of severe distress early in the quarter but then a pick-up in activity as government restrictions eased. Retail sales, industrial production, housing starts, gas sales, air travel, and new jobs are examples of areas that showed some recovery after sharp dips during the quarter.  However, conditions remain below pre-pandemic levels.

Notable Events

  • In attempts to limit the economic damage from the pandemic, governments and central banks around the world enacted numerous stimulus measures including grants and loans to businesses, direct payments to citizens, cutting interest rates, and providing liquidity through bond-buying programs.