Stocks’ Recovery Continues; NASDAQ Now Positive for the Year

U.S. equity growth has been led by companies benefiting from heavy exposure to technology and an increase in remote work.

Stocks continued to move higher in May, as the S&P 500 rallied for a second consecutive month. Continued stimulus from fiscal and monetary authorities has boosted equities, bolstering expectations for an economic rebound later this year and into early 2021. However, positive equity headlines don’t tell the full story, cautions Chief Investment Officer Larry Adam. While he expects equities to be higher over the next 12 to 24 months, near-term risks include rising geopolitical tensions with China as well as potential setbacks related to COVID-19. It helps that mitigation measures have the number of new cases, hospitalizations and the percentage of positive tests trending in the right direction.

U.S.-China relations will likely emerge as a leading theme in the presidential race, explains Washington Policy Analyst Ed Mills. In May, the U.S. outlined restrictive measures targeting China on technology, capital markets and recent laws imposed on Hong Kong. Escalating confrontation between the U.S. and China may undo any progress made during the 2018-19 trade negotiations, and the relationship threatens to hit new lows in 2020, added Mills.

While there has been some promising data on vaccines and therapeutics in recent weeks, there remains a lot of uncertainty on the virus spread, consumer behavior and pace of the economic recovery, explains Joey Madere, senior portfolio strategist, Equity Portfolio & Technical Strategy.

Despite headwinds, equities pushed higher in May. The S&P 500 gained 4.53%, while the Dow Jones rose 4.26% and the Nasdaq delivered 6.75%. The S&P 500 is still down almost 6% on the year, however it has begun to regain key technical levels. Long-term opportunity for an ensuing bull market remains, Adam adds.


12/31/19 Close

5/29/20 Close

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Bloomberg Barclays
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Performance reflects price returns as of market close on May 29, 2020.

Here is a look at some key factors we are watching, both here and abroad: