Week Ending: June 12, 2020
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.
U.S. Treasury yields declined for the week (bond prices and yields move in opposite directions) 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 (below investment grade corporate bonds) lagged. Investment grade corporate bonds are yielding approximately 2.3% and high yield corporate bonds are yielding more than 6%.
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.