Best Month Since 1987

Even though the S&P 500 was down 0.2% for the last week of the month, it was still its best monthly performance since 1987. In fact, according to Factset:

• The DJIA is up 28% from its March 23rd low;
• The S&P 500 is up 27% from its low; and
• NASDAQ is up 26% from its low.

The stock market generally looks forward and although economic news this week was decidedly negative, the mood was more positive as new COVID-19 cases appear to be slowing and the worst might be behind us as local and state economies begin to reopen for business.

While volatility increased on the week, the past month has witnessed a steady decline as the Fear and Greed Index – the VIX – started the month north of 50 and ended around 37. And although Wall Street hopes that volatility might continue its downward trajectory, as economies around the nation and around the world begin to reopen, volatility is likely to remain elevated.

Manufacturing and Exports Drop

The ISM Manufacturing index for April came in at 41.5%, which was the lowest level since April 2009. The data showed a significant increase for supplier deliveries, but it is due to supply chain disruptions and is not a positive sign. Further, while the index for inventories increased too, that was due to weak demand resulting in inventories staying in warehouses longer, another not–so–good sign.

U.S. exports fell 6.7% in March compared to February and U.S. imports were down 2.4%. The largest contributor to the lower export number was automobiles (due to COVID–19 shutdowns), as auto exports were down a whopping 17.8%. Consumer goods and capital goods were down 5% and 4.3%, respectively. The automobile category was also the largest contributor to the lower import number, as auto imports were off 9%.

Consumer Confidence Plunges

Consumer confidence spiraled down as the Conference Board Consumer Confidence Index deteriorated in April, following a sharp decline in March. The Index now stands at 86.9 (1985=100), down from 118.8 in March.

Further, the Conference Board reported that:

• The Present Situation Index – based on consumers\’ assessment of current business and labor market conditions also declined considerably, from 166.7 to 76.4 – the largest drop on record.
• The Expectations Index – based on consumers\’ short–term outlook for income, business and labor market conditions v improved from 86.8 in March to 93.8 this month.

Gross Domestic Product Drops

The Bureau of Economic Analysis reported that real gross domestic product decreased at an annual rate of 4.8% in the first quarter of 2020 whereas real GDP increased 2.1% in the 4th quarter of 2019.

The BEA was quick to point out that their data was incomplete and “subject to further revision” and indicated that another GDP number, based on more complete data, will be released on May 28th.

From the BEA\’s release:

“The decline in first quarter GDP was, in part, due to the response to the spread of COVID-19, as governments issued “stay–at–home” orders in March. This led to rapid changes in demand, as businesses and schools switched to remote work or canceled operations, and consumers canceled, restricted, or redirected their spending. The full economic effects of the COVID–19 pandemic cannot be quantified in the GDP estimate for the first quarter of 2020 because the impacts are generally embedded in source data and cannot be separately identified.”

The BEA\’s further reported that:

• Personal income fell 2%
• Real consumer spending fell 7.6%
• Non-residential investment fell 8.6%

Jobless Claims Trending Down?

Jobless claims rose 3.8 million through April 25th and while the number is massive, it still represents the fourth straight weekly decline from the peak of 6.8 million jobless claims in late March.

From the beginning of the crisis in mid–March, jobless claims are now over 30 million, a staggering percentage given the total labor force is about 163 million.