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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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