Coming off back to back gains in April and May that took the S&P 500 nearly 40% off the March 23rd low, the new month began with the widely followed index gaining another 6% before rising COVID cases put a weight on the rally. Most of the month was like watching a heavy weight fight between Ali and Frazier. In one corner was the Federal Reserve and their massive fire power and in the other corner was a formidable opponent named COVID. One day the Fed was winning, and the next round went to COVID. The concern is rising COVID cases will slow what was expected to be a strong economic recovery. At the end of the month the S&P 500 was up 1.8% and is now down 4% for the year. Oil prices continued to move higher with a gain of 10% and gold was up just under 3%.
The month began with social unrest, increasingly strained relationship between the U.S. & China and economic statistics showing we are deep into a recession. Despite the headlines the market continued to focus not on the abyss, but on the other side of the bridge. On Friday the government reported a record 2.5 million jobs were added in May and the unemployment rate was 13% while analysts had expected 19%. At the end of the week the economic recovery had center stage and the S&P 500 added another 4.9%. The second week began with the tech stocks continuing to lead the way and on Tuesday the tech heavy NASDAQ crossed 10,000 for the first time in history. The week ended with a 5.9% COVID led selloff on Thursday and, despite a strong rally on Friday, the S&P 500 ended the week with a loss of 4.8%. The third week began with the Federal Reserve announcing they will, for the first time in history, buy individual corporate bonds which adds all important stability to the credit markets. Retail sales jumped a record 18% in May, and we learned China would buy more agricultural products from the U.S. in compliance with the trade agreement. The S&P 500 responded with a 1.9% rally. The last full week of the month the focus was back to COVID as spiking cases in more than a dozen states renewed doubts about the speed of the economic recovery. The last day of the week saw a more than 2% decline in the S&P 500 which ended the week down 2.9%. We ended the month with a 1.5% Boeing led rally on the 29th and another 1.5% rally on the last day to make it the best quarter since 1987.
We said last month that our level of uncertainty regarding the short term was higher than normal and that has not changed. If the number of COVID cases continue to spike upward, we could see a much slower economic recovery than the market is currently predicting. With that said, the economy and the market want to recover and once we see a decline in the number of cases, or more importantly, a vaccine, we would expect the market to respond favorably. We did raise cash during the decline earlier this year and we have slowly been putting that cash to work as the market gives us opportunity. The Federal Reserve continues to pump money into the system and, as has been the case for many years, do not fight the Fed! There are some who fear an economic shutdown, but remember, the economy wasn’t shutdown to get rid of the virus, that would never work. It was shutdown to allow hospitals a chance to catch up. Learning to live with COVID is a process and it is taking time.
If you know someone who would be interested in learning more about Greenberg Financial Group, or who is retired or thinking about retiring, or would simply like us to review their current portfolio, please contact us at 520-544-4909, or visit our website at www.greenbergfinancial.com. In addition, the firm is conducting several workshops. You can find the schedules and topics for these seminars by clicking the Upcoming Events tab on our website. Please call our office to reserve a spot.
As always, the key to successful investing is to have a portfolio that is consistent with your investment objectives and risk tolerance. We invite you to listen to our weekly Money Matters radio show which airs every Sunday Morning from 8:00 AM to 10:00 AM on KNST AM 790. You can also listen to us on iHeart radio or watch our show live on Facebook. Please follow us on Twitter @gbergfinancial or on Facebook under Greenberg Financial Group.