Weekly Recap | May 26, 2020

May 18 - 22, 2020 Recap

Best Week in a Month

Small Caps Outperform
Equities rallied into the close Friday to cap a volatile but positive week as investors weighed business reopening news and plans against a backdrop of rising U.S.-China tensions. Dr. Anthony Fauci, the nation’s leading viral expert, said now is the right time to gradually reopen the U.S. economy.

Weekly Performance
For the week, the Dow Industrials gained 3.29%, the S&P 500 rallied 3.27%, and the Nasdaq Composite rallied 3.48%. The small cap-focused Russell 2000 surged 7.87% for its best weekly performance since April 9. The S&P 500 has rebounded over 32% from its March 23 closing low and ended the week just 12.2% below its February 19 all-time high.  

Fed Warns of Ugly Second Quarter GDP
Dallas Fed President Robert Kaplan joined his policymaker peers last week calling for additional fiscal stimulus for state & local governments. Besides urging additional virus testing to revive consumer confidence, he also warned of a progressively worse second quarter GDP report. The Congressional Budget Office (CBO) projected a 38% drop in 2Q GDP.

Industrials Outperform
All 11 S&P 500 sector groups rebounded last week except Healthcare (-0.71%), which gave back most of its prior week gains. Industrials (+7.31%), Energy (+6.54%), and Real Estate (+5.66%) climbed the most, while Technology (+3.35%), Utilities (+3.06%) and Consumer Staples (+0.28%) gained the least. 

Treasury Prices Rally
U.S. benchmark 10-year Treasury yields, which fall when prices rise, rose over 8.2 basis points last Monday to 0.73%, but finished Friday at 0.66%, little changed from 0.65% the week prior. The U.S. Dollar Index fell 0.54% last week. U.S. WTI crude oil futures rose 12.6% last week to finish at $33.25/barrel, a two-month high.

What We’re Reading 

Japan Lifts State of Emergency

OECD Nations 1Q GDP Falls 1.8%  

Eurozone Economy Bottomed in April

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Economic Calendar

Monday, May 25
No Major Releases, Memorial Day.

Tuesday, May 26
Case-Shiller Home Prices, Consumer Confidence, New Home Sales, Dallas Fed Manufacturing.

Wednesday, May 27
Mortgage Activity, Richmond Fed Manufacturing, Fed Beige Book. 

Thursday, May 28
1Q GDP Revision, Personal Consumption/PCE Prices, Durable Goods Orders, Jobless Claims, Pending Home Sales.

Friday, May 29
Goods Trade Balance, Wholesale/Retail Inventories, Personal Incomes & Outlays, MNI Chicago PMI, Consumer Sentiment.

Weekly mortgage application volume might be pointing to an early recovery for the housing market. Purchase volume has accelerated off the April low and is near levels reached in mid-February, adjusted for seasonality. Record low mortgage rates are providing support for housing demand in the near-term. With that said, the housing market will likely be negatively impacted if the unemployment rate remains at an elevated level.

^{This report is created by Cetera Investment Management LLC.} 

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^{Glossary
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ.}

^{The S&P 500 is an index of 500 stocks chosen for market size, liquidity and industry grouping (among other factors) designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe.}

^{The NASDAQ Composite Index includes all domestic and international based common type stocks listed on The NASDAQ Stock Market. The NASDAQ Composite Index is a broad-based index.}

^{The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe and is a subset of the Russell 3000 Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership.} 

^{The Russell 3000 Index measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market.}

^{The Russell Midcap Index measures the performance of the mid-cap segment of the U.S. equity universe. It includes approximately 800 of the smallest companies in the Russell 1000 Index, based on a combination of their market cap and current index membership. The Russell Midcap represents approximately 31% of the total market capitalization of the Russell 1000 Index.} 

^{The Bloomberg Barclays US Aggregate Bond Index, which was originally called the Lehman Aggregate Bond Index, is a broad based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government–related and corporate debt securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS and CMBS (agency and non-agency) debt securities that are rated at least Baa3 by Moody’s and BBB- by S&P. Taxable municipals, including Build America bonds and a small amount of foreign bonds traded in U.S. markets are also included. Eligible bonds must have at least one year until final maturity, but in practice the index holdings have a fluctuating average life of around 8.25 years. This total return index, created in 1986 with history backfilled to January 1, 1976, is unhedged and rebalances monthly.} 

^{The Bloomberg Barclays US Corporate High Yield Index measures the USD-denominated, non-investment grade, fixed-rate, taxable corporate bond market. Securities are classified as high yield if the middle rating of Moody's, Fitch, and S&P is Ba1/BB+/BB+ or below, excluding emerging market debt. Payment-in-kind and bonds with predetermined step-up coupon provisions are also included. Eligible securities must have at least one year until final maturity, but in practice the index holdings have a fluctuating average life of around 6.3 years. This total return unhedged index was created in 1986, with history backfilled to July 1, 1983 and rebalances monthly.} 

^{The Bloomberg Barclays US Municipal Bond Index covers the USD-denominated long-term tax-exempt bond market. The index has four main sectors: state and local general obligation bonds, revenue bonds, insured bonds, and prerefunded bonds. Many of the subindicies of the Municipal Index have historical data to January 1980. In addition, several subindicies based on maturity and revenue source have been created, some with inception dates after January 1980, but no later than July 1, 1993. Eligible securities must be rated investment grade (Baa3/BBB- or higher) by Moody’s and S&P and have at least one year until final maturity, but in practice has a fluctuating average life of around 12.8 years. This total return index is unhedged and rebalances monthly.} 

^{The MSCI All-Country World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. The SMCI ACWI consists of 46 country indexes comprising 23 developed and 23 emerging market country indexes. The developed country indexes include: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom and the United States. The emerging market country indexes included are: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates.} 

^{The MSCI EAFE Index is designed to measure the equity market performance of developed markets (Europe, Australasia, Far East) excluding the U.S. and Canada. The Index is market-capitalization weighted.} 

^{The MSCI Emerging Markets Index is designed to measure equity market performance in global emerging markets. It is a float-adjusted market capitalization index.} 

^{The MSCI Europe Index is a free float-adjusted market capitalization index that is designed to measure developed market equity performance in Europe.} 

^{The MSCI Pacific Index captures large and mid-cap representation across five Developed Markets (DM) countries in the Pacific region. With 470 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country.} 

^{The Bloomberg Commodity Index is a broadly diversified index that measures 22 exchange-traded futures on physical commodities in five groups (energy, agriculture, industrial metals, precious metals, and livestock), which are weighted to account for economic significance and market liquidity. No single commodity can comprise less than 2% or more than 15% of the index; and no group can represent more than 33% of the index. However, between rebalancings, group weightings may fluctuate to levels outside the limits. The index rebalances annually, weighted 2/3 by trading volume and 1/3 by world production.} 

^{The S&P GSCI Crude Oil Index is a sub-index of the S&P GSCI, provides investors with a reliable and publicly available benchmark for investment performance in the crude oil market.} 

^{The S&P GSCI Gold Index, a sub-index of the S&P GSCI, provides investors with a reliable and publicly available benchmark tracking the COMEX gold futures market.} 

^{West Texas Intermediate (WTI) is crude oil produced in Texas and southern Oklahoma which serves as a reference or "marker" for pricing several other crude streams. WTI is the underlying commodity of the New York Mercantile Exchange's oil futures contracts.} 

<sup>The Cboe Volatility Index® (VIX®) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices.

The U.S. Dollar Index is a weighted geometric mean that provides a value measure of the United States dollar relative to a basket of major foreign currencies. The index, often carrying a USDX or DXY moniker, started in March 1973, beginning with a value of the U.S. Dollar Index at 100.000. It has since reached a February 1985 high of 164.720 and has been as low as 70.698 in March 2008.</sup>

^{Disclosures
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^{Nothing in this presentation should be construed as offering or disseminating specific investment, tax, or legal advice to any individual without the benefit of direct and specific consultation with an investment adviser representative authorized to offer Cetera Investment Management services. Information contained herein shall not constitute an offer or a solicitation of any services. Past performance is not a guarantee of future results.}

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^{No independent analysis has been performed and the material should not be construed as investment advice. Investment decisions should not be based on this material since the information contained here is a singular update, and prudent investment decisions require the analysis of a much broader collection of facts and context. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The opinions expressed are as of the date published and may change without notice. Any forward-looking statements are based on assumptions, may not materialize, and are subject to revision.}

^{All economic and performance information is historical and not indicative of future results. The market indices discussed are not actively managed. Investors cannot directly invest in unmanaged indices. Please consult your financial advisor for more information.}

^{Additional risks are associated with international investing, such as currency fluctuations, political and economic instability, and differences in accounting standards.}