MONSTER QUARTER FOR STOCKS
Biggest gains since 1998 follow big setback in March
Wall Street capped its best quarter since 1998 Tuesday with more gains, a fitting end to a stunning three months for investors as the market screamed back toward its record heights after a torrid plunge.
The S&P 500 climbed 1.5%, bringing its gain for the quarter to nearly 20%. That rebound followed a 20% drop in the first three months of the year, the market’s worst quarter since the 2008 financial crisis. The plunge came as the coronavirus pandemic ground the economy to a halt.
“It’s the first time you’ve had back-toback [quarters] like this since the 1930s,” said Willie Delwiche, investment strategist at Baird. “It’s pretty unprecedented.”
The whiplash that ripped through markets in the second quarter came as investors looked beyond dire unemployment numbers and became increasingly hopeful that the economy can pull out of its severe, sudden recession relatively quickly. The hopes looked prescient after reports showed employers resumed hiring and retail sales rebounded.
The quarter’s gains were ignited by promises of massive amounts of aid from the Federal Reserve and Congress. Low interest rates generally push investors toward stocks and away from the low payments made by bonds, and the Federal Reserve has pinned short-term interest rates at their record low of nearly zero.
But most of Wall Street says not to expect anything close to a repeat of the rocking second quarter. A rise in infections has several states pausing their lifting of restrictions. The surge in confirmed new cases, which has prompted the European Union to bar U.S. travelers from entry, is seeding doubts that the economic recovery can happen as quickly as markets had forecast. That helps explain why the market’s momentum cooled somewhat in June.
The S&P 500 has rallied back to within nearly 8.4% of its record set in February, after being down nearly 34% in late March. At one point this month, it had climbed as close as 4.5%.
“Broadly speaking, the market is reacting to economic data that is better than expected,” said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management.
Schutte said the market is being supported by the likelihood that there won’t be a nationwide shutdown again, aggressive monetary policy and hopes for a vaccine sooner rather than later. “The path of least resistance is still two steps forward, one step back,” he said.