April Market Overview
April brought about some much-welcomed relief for investors, in spite of a deluge of poor economic news. For the month, all major equity indexes were strongly positive, with the S&P 500 posting a gain of 12.8%, the best month since 1987.
Still, with so many businesses closed and consumers staying at home, it is no surprise that the economy has taken a big hit. Indeed, over 30 million Americans have filed for unemployment benefits over the last six weeks, manufacturing contracted more than it has in over a decade, and first quarter GDP declined 4.8%.
The divergence between the economic data that was reported throughout the month and the performance of the markets, we believe, is largely attributable to the unprecedented amount of government stimulus aimed at curbing the devastating economic impacts of the coronavirus, which drove the sharp upswing in stocks in late March that continued throughout April. Also supportive of the rebound were signs of stabilization in the number of new cases and deaths, as well as some promising news on potential treatments.
While stocks performed well in the month by any standard, there is one point we’re going to call some special attention to, which is that the biggest companies are disproportionately driving market returns. In fact, the five largest companies in the S&P 500 – Microsoft, Apple, Amazon, Facebook, and Alphabet (the parent company of Google) – now account for approximately 20% of the total index, and each of these companies performed above the overall index (Amazon was particularly notable at +26.9% for the month).1 Thus, many equity investors probably didn’t gain quite as much as the widely touted S&P 500 benchmark.
Elsewhere, in Fixed Income, the majority of the major indexes were up slightly, with corporates performing most strongly as investor angst eased. Interest rates were little changed for the month and remain at historic lows.
Looking forward, we are encouraged by the evidence that social distancing measures have been effective at slowing the spread of COVID-19, and yet we acknowledge that it will take time for the country to find a new normal and even longer for many of the most impacted businesses and consumers to recover from the devastating impacts the virus has caused. While we are encouraged by the swift April rebound, we believe the markets remain susceptible to above-average price swings for the time being.
The monthly Market Overview is written by two members of MACRO’s Investment Committee, Mark Cortazzo, CFP®, CIMA®, and Christopher Moffett, CFA.
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