Looking Back at the Markets in May and Ahead to June 2020

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May was a good month, in terms of the virus, the economy, and the markets. But what does this positive news mean for the month ahead? Let’s take a closer look.

A look back

Flattening of the curve. For the virus, the growth rate of infections dropped from 3.3 percent per day on May 1 to 1.2 percent per day on June 1—a significant improvement. Actual case growth dropped from 36,007 to 22,152 per day over the same period. Plus, testing increased from under 300,000 per day to more than 400,000 per day. After the panic of March and April, May was the month that the curve was flattened: viral growth rates and case counts came down to levels that the health care system could support, while testing started to get ahead of the demand.

Economies reopened. In fact, the improvement in the virus was so substantial that states around the country started to reopen their economies during the month. Forty-two states had imposed statewide stay-at-home orders by early April; of those, 37 expired during April or May, with the rest expiring throughout June. While some restrictions remain in place, the expiration of the stay-at-home orders has allowed businesses to reopen, employees to return to work, and consumers to shop again.

Worst of job losses behind us. May’s reopening has gone much better than expected. From a jobs perspective, new layoffs continued to decline during the month, and the continuing claims data suggested that a substantial number of employees had returned to work. The May jobs report from ADP (a large payroll company) also showed improvement, with job losses coming in at 2.76 million. This number was not great, but it was much better than the 9 million losses expected. The worst of the job losses ended in May, and improvement looks to be underway.

More signs of improvement. Other May developments were also hopeful. Apple’s Mobility Trends report, which tracks requests for directions in Apple Maps, was down 60 percent from the start of the pandemic in April, was down 30 percent at the start of May, and had fully recovered by the start of June. Mortgage applications moved above the pre-pandemic levels, suggesting the housing market was recovering, and auto sales improved significantly from April levels. All in all, May showed the economy opening faster and more smoothly than expected.

Markets up around the world. Market action reflected this improvement. For the second month in a row, markets were up around the world. U.S. markets were up between 4 percent and 7 percent, while international markets were up from just under 1 percent for emerging markets to just over 4 percent for developed markets. Stock markets around the world continue to expect a smooth recovery. Based on May’s data, this outcome remains a real possibility.

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