Stocks across the globe continued to recover from their March lows with improving economic data and encouraging earnings providing the requisite catalyst in July. Domestic large cap equities have moved into positive territory for calendar year 2020 and are only marginally below their all-time highs, despite the continued impacts from virus related restrictions.
The ascent of the S&P 500 has been buoyed by impressive returns from Technology stocks, but the poor performance by more cyclically sensitive sectors has created concern for some. While we do not necessarily subscribe to the worries of the bear camp that additional gains may prove fleeting, we do believe that broad index upside will require improving breadth. Broader participation could occur as economic expectations remain low, despite numerous metrics indicating that the most dire economic predictions seem increasingly unlikely.
Fiscal and monetary support remain in place and any potential lapse is likely to prove short lived. While the road forward for both the economy and the stock market is likely to be fitful, the trajectory of each remains firmly upward, yet decelerating. For now, the fall back in economic activity has not been as significant as feared. Until such a point that this relationship changes, the stock market should show favorably relative to other investment classes.