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Economic Data Overshadowed by a Resurgence in Coronavirus

Market Data as of Week Ending 07/10/2020 unless noted otherwise.

EQUITIES
U.S. stock prices were mixed for the week as large companies advanced while smaller sized companies underperformed. Economic sector performance was also mixed with declines in energy, industrials, and real estate offset by gains in the consumer, financials, technology, and communication sectors. Developed foreign stocks in Europe and Asia lagged U.S stocks while Emerging Market stocks outperformed both domestic and developed foreign markets.

BONDS
U.S. Treasury yields declined this past week. Most notably, long term yields returned to lows last seen in April. Long term government bonds were the best performing segment followed by investment grade corporate bonds. Within short and intermediate bonds, high yield corporate bonds outperformed as investors seek yield. Investment grade corporate bonds are yielding approximately 2.1% and high yield corporate bonds are yielding more than 6%.

MACROECONOMIC DATA
Most of the economic data was overshadowed by a resurgence in coronavirus cases across several U.S. states. By the end of the week, the U.S. reported more than 60,000 daily new cases and over 3 million confirmed cases since the start of the pandemic. Analysts have forecasted that S&P 500 revenue will drop 10% and earnings will decline more than 40% for the second quarter. Despite a trend of higher cases in Tokyo, Japan has relaxed its coronavirus-related restrictions allowing up to 5,000 people at large events.

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S&P 500 Records Highest Quarterly Gain Since 1998

Market Data as of Week Ending 07/3/2020 unless noted otherwise.

EQUITIES
U.S. stock prices advanced as the S&P 500 index recorded its highest quarterly gain (+20.5%) since 1998. Small and medium sized companies generally lagged large companies and growth outperformed, regardless of company size. All major economic sectors ended the week in positive territory, led by gains in real estate, materials, and consumer discretionary stocks. Developed foreign stocks in Europe and Asia lagged U.S stocks while Emerging Market stocks outperformed developed foreign markets.

BONDS
U.S. Treasury yields were mixed for the week as short term bond yields narrowly declined while intermediate and long term yields nudged higher. Investment grade corporate bonds outperformed both government bonds and high yield corporate bonds, as investors balance credit quality and interest rate risks. Investment grade corporate bonds are yielding approximately 2.2% and high yield corporate bonds are yielding more than 6%.

MACROECONOMIC DATA
The June employment report was better than expected, as the unemployment rate declined to 11%, after reaching a peak of nearly 15% in April. Other positive economic reports included rising consumer confidence, a surge in pending home sales, and improving survey data from the manufacturing sector. Global manufacturing data in Europe and China continued to show significant improvement, which are positive signs for a sustained economic recovery.

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Unemployment Benefits Claims Dropped for the First Time Since Late April

Market Data as of Week Ending 06/26/2020 unless noted otherwise.

EQUITIES
U.S. stock prices declined as new coronavirus cases accelerated across certain regions of the country. Small and medium sized businesses delivered mixed results; however, a clear preference for growth stocks was evident, regardless of company size. Higher growth sectors, such as technology, outperformed while more cyclical sectors, such as energy and financials, declined for the week. Developed foreign stocks in Europe and Asia outperformed U.S stocks for the fourth consecutive week while Emerging Market stocks outperformed developed foreign markets.

BONDS
U.S. Treasury yields declined for the week as investor sentiment pivoted and demand for higher quality bonds increased. Government bonds outperformed while high yield corporate bonds lagged. Investment grade corporate bonds are yielding approximately 2.2% and high yield corporate bonds are yielding more than 6%.

MACROECONOMIC DATA
Initial jobless claims rose by another 1.5 million last week, but Americans claiming ongoing unemployment benefits claims dropped below 20 million for the first time since late April. The IMF downgraded 2020 global growth to a nearly 5% decline, which if realized, would be the largest contraction since 1946.

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Even as jobless claims rise by 1.5 million, investor sentiment remains positive

Market Data as of Week Ending 06/19/2020 unless noted otherwise.

EQUITIES
U.S. stock prices advanced as investor sentiment and favorable economic reports supported risk assets. Small and medium sized businesses delivered mixed performance; however, a clear preference for growth stocks was evident, regardless of company size. Higher growth sectors such as technology outperformed while more defensive sectors such as real estate and utilities declined for the week. Developed foreign stocks in Europe and Asia outperformed U.S stocks for the third consecutive week while Emerging Market stocks lagged developed foreign markets.

BONDS
U.S. Treasury yields were mostly flat for the week as Fed Chair Jerome Powell testified before Congress and made the case for additional fiscal stimulus to support economic growth. Corporate bonds outperformed after the Federal Reserve announced that it will begin buying a broad portfolio of U.S. corporate bonds. Investment grade corporate bonds are yielding approximately 2.2% and high yield corporate bonds are yielding more than 6%.

MACROECONOMIC DATA
Initial jobless claims rose by another 1.5 million last week and there are nearly 20.5 million Americans claiming ongoing unemployment benefits. The Bank of England increased its bond-buying program by GBP 100 billion while Japan reported that the country’s exports declined 28% year over year.

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U.S. Stock Prices Recorded their Worst Weekly Decline in Almost Three Months

Market Data as of Week Ending 06/12/2020 unless noted otherwise.

EQUITIES
U.S. stock prices retreated and recorded their worst weekly decline in almost three months. Market leadership reversed as cyclical sectors such as energy, financials, industrials, and materials underperformed while stocks in defensive and higher growth sectors outperformed. Small and medium sized businesses underperformed as investor sentiment shifted away from higher risk assets. Developed foreign stocks in Europe and Asia outperformed U.S stocks for the second consecutive week and Emerging Market stocks outperformed developed foreign markets.

BONDS
U.S. Treasury yields declined for the week as concerns about the pandemic were priced into financial markets. Higher quality bonds such as government and investment grade corporate bonds outperformed, while high yield lagged. Investment grade corporate bonds are yielding approximately 2.3% and high yield corporate bonds are yielding more than 6%.

MACROECONOMIC DATA
Initial jobless claims rose by 1.5 million last week and there are nearly 21 million Americans claiming ongoing unemployment benefits. The Federal Reserve announced that as their baseline expectation, there will be no interest rate increases through 2022.

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Stocks advanced for the third consecutive week

Market Data as of Week Ending 06/05/2020 unless noted otherwise.

EQUITIES
Stocks advanced for the third consecutive week and recorded the best weekly gain in two months. Cyclical sectors such as Financials, Industrials, and Energy outperformed while defensive sectors such as Consumer Staples, Healthcare, and Utilities lagged. Small and medium sized businesses also delivered solid gains. Developed foreign stocks in Europe and Asia outperformed U.S stocks during the week and Emerging Market stocks outperformed developed foreign markets.

BONDS
U.S. Treasury yields rose for the week as positive economic news pushed the yield on the intermediate and long-term bonds higher. For the third consecutive week, investment grade corporate bonds outperformed government bonds, while high yield was the top performing asset class. Investment grade corporate bonds are yielding approximately 2.4% and high yield corporate bonds are yielding more than 6%.

MACROECONOMIC DATA
The U.S. Labor Department reported that 2.5 million positions were added during the month of May compared to consensus expectations for a decline of around 9 million jobs. In Europe, the European Central Bank increased its stimulus program by EUR 600 billion to EUR 1.35 trillion, extending it until at least June 2021.

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Stocks Advance for Second Consecutive Week

Market Data as of Week Ending 05/29/2020 unless noted otherwise.

EQUITIES
Stocks advanced for the second consecutive week as both investor and consumer sentiment improved. A combination of cyclical sectors (Financials, Industrials, and Materials) and defensive sectors (Real Estate and Utilities) outperformed. Small and medium sized businesses also delivered solid gains. Companies in the S&P 500 are expected to finish the first quarter with an earnings decline of nearly 15% and the consensus forecast for calendar year 2020 is a decline of more than 20%. Developed foreign stocks in Europe and Asia outperformed U.S stocks during the week, but Emerging Market stocks lagged developed foreign markets.

BONDS
U.S. Treasury yields were mixed for the week as short and intermediate term bond yields narrowly declined while longer term yields nudged higher. For the second consecutive week, investment grade corporate bonds outperformed government bonds, while high yield was the top performing asset class. Investment grade corporate bonds are yielding approximately 2.5% and high yield corporate bonds are yielding nearly 7%.

MACROECONOMIC DATA
Initial jobless claims rose by another 2 million last week; however, continuing claims dropped to 21 million recording the first decline since the coronavirus pandemic began. As states begin to let businesses reopen, U.S. consumer sentiment posted a surprise gain in the preliminary May report. Europe and Japan announced additional stimulus measures, but that news was overshadowed by rhetoric from U.S. and Chinese officials threatening the trade deal reached earlier in the year between the two countries.

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Small and Medium Businesses Return to Forefront — Outperform Larger Counterparts

Market Data as of Week Ending 05/22/2020 unless noted otherwise.

EQUITIES
Stocks advanced last week as investors responded to a combination of improving economic data and easing financial conditions. Small and medium sized businesses returned to the forefront and significantly outperformed their larger counterparts for the week. Companies in the S&P 500 are expected to finish the first quarter with an earnings decline of nearly 15% and will mark the largest year-over-year decline in earnings reported by the index since the third quarter of 2009 (-15.7%). Developed foreign stocks in Europe and Asia also advanced during the week, but Emerging Market stocks lagged developed foreign markets.

BONDS
U.S. Treasury yields rose for the week as investors clearly pivoted back toward higher risk assets. Investment grade corporate bonds outperformed government bonds while high yield was the top performing asset class. Corporate bonds are benefiting from a new source of demand as the Federal Reserve began purchasing U.S. corporate bond ETFs on May 12th. Investment grade corporate bonds are yielding more than 2.5% and high yield corporate bonds are yielding more than 7%.

MACROECONOMIC DATA
Jobless claims rose by more than 2 million last week, bringing the total to nearly 39 million Americans who have filed initial claims for unemployment insurance since the COVID-19 crisis began. The price of oil has rebounded and is back above $30/barrel as the supply overhang appears to have peaked and demand has begun to normalize. China announced that it will abandon economic growth targets, but that was overshadowed by news that the country will force national security legislation on Hong Kong.

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U.S. Treasury Yields Declined for the Week as Investors Demonstrated Preference for High Quality Over Risk Assets

Market Data as of Week Ending 05/15/2020 unless noted otherwise.

EQUITIES
Stocks retreated as investors were presented with economic data and warnings of further weakness ahead. Following three consecutive weeks of out-performance for small and medium sized businesses, they significantly lagged their larger counterparts for the week. S&P 500 companies have reported an earnings decline of more than 10% for the first quarter and analysts expect a decline of nearly 20% in calendar year 2020. Developed foreign stocks in Europe and Asia also declined during the week, but Emerging Market stocks outperformed developed foreign markets.

BONDS
U.S. Treasury yields declined for the week as investors demonstrated preference for high quality over risk assets. Investment grade corporate bonds outperformed both government and high yield. Investor demand for a combination of quality and yield continues to build. Investment grade corporate bonds are yielding more than 2.5% and high yield corporate bonds are yielding more than 7.5%.

MACROECONOMIC DATA
Jobless claims rose by 3 million last week, bringing the total to more than 36 million Americans who have filed initial claims for unemployment insurance since the COVID-19 crisis began. Not surprisingly, U.S. retail sales dropped 16% in April to a new record as the pandemic upended the economy. However, U.S. consumer sentiment posted a surprise increase as the University of Michigan’s preliminary index rose nearly 2 points from an eight-year low to 73.7.

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Market Prices Recover Even as Unemployment Hits 70 Year High

Market Data as of Week Ending 05/08/2020 unless noted otherwise.

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EQUITIES

Stock prices recovered after a rough start to the month of May. Small and medium sized businesses outperformed their larger counterparts for the third consecutive week. Investors responded favorably to reports that treatments might bring an eventual end to the health and economic crisis. For the first quarter, S&P 500 companies have reported an earnings decline of more than 10% and analysts expect a decline of nearly 20% for calendar year 2020. Developed foreign stocks in Europe and Asia posted much more modest gains for the week and Emerging Market stocks declined, underperforming developed foreign markets.

BONDS

U.S. Treasury yields were mixed for the week as short-term bond yields declined while long-term yields increased. Below investment grade corporate bonds outperformed as investor demand continues to build for higher yielding credit. Investment grade corporate bonds are yielding more than 2.5% and high yield corporate bonds are yielding more than 7.5%.

MACROECONOMIC DATA

The official U.S. employment report was released for April and the unemployment rate increased to 14.7%, the highest in more than 70 years. Some positive news in the report was that the vast majority of those laid off told surveyors that they expected to be rehired within six months. However, expanded unemployment benefits through the summer could make unemployment a more financially viable option than going back to work for lower wage earners. Signs of fragmentation emerged in Europe when the German Constitutional Court ruled that parts of the European Central Bank’s (ECB) bond-buying program were unconstitutional.