Stocks Regain Ground as States Discuss Plans to Reopen

All three major U.S. equity indices saw double-digit recovery in April, though most levels are still far from pre-coronavirus highs.

Globally, billions remain at home under some variation of COVID-related lockdowns and social distancing, a phrase many of us hadn’t heard or used up until this year. Unsurprisingly, this has affected just about every industry, from restaurants to airlines to the oil industry. Oil demand has dropped precipitously, prompting prices to briefly turn negative in April for the first time in history. While prices have begun to stabilize and governments are starting to ease lockdown policies, it will take a long time for oil demand to fully recover, explains Energy Analyst Pavel Molchanov. “We anticipate COVID’s oil demand impact peaking in the second quarter, and then subsiding in the summer and especially toward the end of the year,” he added.

Reopening state economies is a leading theme in the news, however, we believe that doing so will need to be done carefully and deliberately, most likely in phases, according to Washington Policy Analyst Ed Mills. Federal reopening guidelines are more restrictive than some might think in an attempt to stave off a resurgence in cases, which, of course, would hinder a return to large-scale economic normalcy. The timing of an economic restart remains up in the air, and there are still challenges around therapies, a possible vaccine, the impact on consumer behavior and the general trajectory of an economic recovery, adds Joey Madere, senior portfolio strategist, Equity Portfolio & Technical Strategy.

In the meantime, the policy response has thus far activated close to $3 trillion to help people in need and bolster the economy, but lawmakers are not done yet. The scope and scale of another fiscal relief package will be heavily debated, but additional support for individuals, markets and the economy should arrive over the next few weeks, Mills notes.

Despite deteriorating economic data (e.g., U.S. jobless claims increased by 26 million over a four-week span; consumer confidence declined to multi-year lows) as a result of stay-at-home orders to combat the coronavirus, risk assets moved sharply higher during April, explains Chief Investment Officer Larry Adam. Investors looked through the near-term halt in economic activity with increased optimism for a potential coronavirus therapeutic (Remdesivir). Market observers are also seeking more clarity regarding a timeline for the reopening of the U.S. economy.

Record stimulus and a slowing of new COVID-19 cases has proved a more stable environment for U.S. equities, explains Madere. Stocks have continued to push higher, although they haven’t yet made up for the deep losses of last month and still ended April in negative territory. The S&P 500 climbed about 12.68% for April, while the Dow Jones rose about 11% and the Nasdaq delivered 15.45%.


12/31/19 Close

4/30/20 Close

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Performance reflects price returns as of market close on April 30, 2020.