After briefly turning positive for the year and the Nasdaq topping 10,000 for the first time ever, US Equity Markets fell sharply last week as Fed Chairman Powell raised concerns about the hoped-for US economic recovery and a surge in coronavirus cases led to significant profit-taking. As a result, the S&P 500 dropped 4.8% for the week to reduce its losses for the year to down 5.9%. The Nasdaq continues to outperform, only down 2.3% for the week and still up 6.9% for the year, while the Russell 2000 (small-cap stocks) plunged 7.9% for the week to bring its losses for the year to down 16.8%.
Global Equity Markets declined notably as well last week on the renewed US economic concerns and European growth data that came in below expectations. As a result, Developed Markets fell 4.3% for the week to bring its losses for the year to down 13.4%. Emerging Markets held up better, only down 1.6% for the week, but they remain down 11.5% for the year.
After rising meaningfully the prior week, US interest rates fell notably last week on the renewed US economic concerns. The Federal Reserve held its June meeting last week where they announced their expectation of US economic growth to decline by 6.5% in 2020. They further indicated that they expect to keep the Fed Funds rate near 0.0% through at least 2022 given their outlook for the US economy. The yield on the US 10-Year Treasury fell to 0.70% from 0.90% the prior week.
Of Interest to Us
While it is still too early to predict the outcome of the upcoming November elections, the betting odds in the markets have shifted significantly over the past couple of months. The current betting odds place a 57% chance of a Democratic sweep in the upcoming elections, winning the presidency, taking over the Senate, and maintaining the House. In February, the betting odds placed a roughly 55% chance of Trump being re-elected, the Republicans keeping the Senate, and the Democrats keeping the House.
for the week ending 6/12/2020
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