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The Q2 Review

Stay at Home Orders and Stimulus Measures

Today is July 1 which means it’s officially the beginning of the third quarter—the world has made it halfway through a historic 2020.

The last quarter began in April. At one point during the month, 95% of Americans were under stay-at-home orders. To prop up an economy reeling from the unprecedented circumstances, the Federal Reserve lowered interest rates to zero, announced it would buy investment grade and high yield corporate bonds, and put unlimited quantitative easing measures in place. The Federal Government also launched its most significant fiscal stimulus measures since World War II. This included forgivable loans for small businesses, drastically expanded unemployment benefits, and direct checks worth $1,200.

Volatile Markets

During Q1, investors witnessed the most rapid 30% market decline ever. Then in the second quarter, markets made their largest 50-day comeback in history. On June 3 the S&P 500 climbed above 3,100, and on June 10 the Nasdaq spiked to record highs. The S&P 500 ultimately finished the second quarter 20% higher, clocking in its biggest percentage gain since the fourth quarter of 1998. Meanwhile, the Dow rose 18%, its best quarter since 1987. Last, but not least, the Nasdaq led the pack, adding 31% over the past three months and is now up 12% for this year.

The IPO market was almost stagnant when Q2 began, but it began to rebound with several large public debuts from Warner Music Group (WMG), ZoomInfo Technologies (ZI), and Albertsons (ACI).

Looking Ahead

The first two quarters of this year have been anything but predictable, and this next quarter could be just as volatile. Investors will be closely watching several upcoming events.

At the end of July, the extra $600 per week in federal unemployment benefits will run out. Lawmakers are in talks about passing another coronavirus relief bill.

The EU will open its borders starting today, but only to visitors from 15 countries. Investors will be watching to see how this impacts airlines and the rest of the travel industry.

Later on this quarter, schools will begin their fall semesters. Everywhere from elementary schools to universities, administrators will be working to determine how to safely start the year. Some schools announced plans to return to campus, while others are opting to stick with remote learning or a hybrid model of in-person and online learning.

Each of these developing stories will depend on COVID-19 infection numbers. Last week, 36 US states reported a rise in cases. However, this month, several important coronavirus vaccine trials will take place. If this research advances successfully, Q3 could bring much-needed relief from a public health perspective and an economic standpoint.

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