This past week was a time of tremendous contrasts. The market closed the month of May with a strong rally driven by resilient tech stocks and essential goods companies and clinging to the glimmers of hope starting to appear in the slowly reopening economy and the early stages of vaccine development. SpaceX successfully partnered with NASA to launch the first manned U.S. spacecraft in nearly a decade. It was an inspiring display of American innovation and leadership. And at the same time racial tensions surrounding the killing of George Floyd exploded into rioting and looting across the country. And China’s latest and most severe crack down on Hong Kong further inflamed the already mounting tensions between the U.S. and China. Perhaps all that can be said is that we are in a time of heightened uncertainty. The pandemic has brought out the best and also the worst in our country. Given the unpredictable nature of the pandemic, it is impossible to know whether the economic devastation and social unrest will derail the market recovery. And so the best approach is to remain invested but with caution and diversification as we continue to weather the storm.

Real-time Data Indicates Economy is Reopening

One of the biggest challenges in the measuring the economy during the pandemic is that the traditional economic indicators are so far removed from historical levels and so delayed as events quickly unfold that the data is not generally useful. New, faster measures know as “real-time data” such as the charts above that use anonymous cell phone location data, are increasingly providing timely and relevant information. This study from the Dallas Federal Reserve shows substantial increase in economic activity in late April and May. Numbers like this may be more relevant than the traditional metrics such as GDP and weekly unemployment claims in this unprecedented environment.

Bloomberg Recovery Tracker Shows Broad-Based Improvements

Though many of the data points measuring the current economy still look troubling compared to historical levels, a recent study by Bloomberg found that in a wide range of key metrics, the re-opening economy is showing real progress. Though a certain amount of economic weakness will likely persist for some time, it now appears that the worst has passed. The main question that we need to continue to monitor is whether the economic recovery will be a swift V-shape or a more gradual U-shape.

Volatility Spikes in the S&P 500

In the first 5 months of 2020, the S&P has experienced a +/- 3% or greater daily move one quarter of the time, nearly 9x more than its 20-year average.

Source: Bloomberg and GSAM.

Articles We’re Reading

A reflection on risk: in investing the average consequences of risk make up most of the daily news headlines. But the tail-end consequences—like pandemics and depressions—are what make the pages of the history books … (link)


The coronavirus is exposing Wall Street’s reckless gamble on bad debt …(link)

U.S. Renewable energy outstrips coal for the first time since the 19th century… (link)

Market Snapshot

For the Month Ending 5/31/2020 (Cumulative Returns)1

1Source – Morningstar, Inc. Corporate Bonds is presented as the iShares iBoxx $ Investment Grade Corporate Bond ETF. Municipal Bonds is presented as the iShares National Municipal Bond ETF. High Yield Bonds is presented as the iShares iBoxx $ High Yield Corporate Bond ETF. 10 Year Treasury refers to the valuation of a 10 Year Treasury Note, a debt obligation issued by the U.S. Department of the Treasury. Fed Funds Target represents upper limit of the federal funds target range established by the Federal Open Market Committee. Inflation Rate provided for the purposes of this report by the U.S. Bureau of Labor Statistics. Unemployment Rate calculated by the U.S. Bureau of Labor Statistics. WTI Crude Oil refers to the price of a barrel of West Texas Intermediate NYMEX) Crude Oil. Gold – Spot Price relates to the valuation of an ounce of gold, as traded on the NYSE Arca Exchange. U.S. Dollar refers to the U.S. Dollar Index (DXY). All Returns are denominated in USD (United States Dollar), unless otherwise explicitly noted.

Did You Know?

Lavish Parties, Greedy Pols and Panic Rooms: How the ‘Apple of Pot’ Collapsed

When the legal marijuana industry began to emerge, it seemed that the biggest players were unstoppable. The demise MedMen, once the leading pot startup, is a good reminder of the importance of due diligence even—or especially—when a company is part of a hugely hyped trend. …(link)

Presented by the Investment Committee of Lake Street, an SEC Registered Investment Adviser

The information contained herein constitutes general information and is not directed to, designed for, or individually tailored to, any particular investor or potential investor. This report is not intended to be a client-specific suitability analysis or recommendation, an offer to participate in any investment, or a recommendation to buy, hold or sell securities. Do not use this report as the sole basis for investment decisions. Do not select an asset class or investment product based on performance alone. Consider all relevant information, including your existing portfolio, investment objectives, risk tolerance, liquidity needs and investment time horizon. Diversification does not ensure a profit or guarantee against a loss. There is no assurance that any investment strategy will be successful. Investing involves risk and you may incur a profit or a loss.