Stocks around the world had a surprisingly strong second quarter, while the economic and societal healing process post the pandemic-induced recession is just getting under way. The impairment to businesses around the world from the virus has been significant and is commensurate with this being the most disruptive global health crisis experienced in over a century. In the past couple of months, forty-four million people have lost their jobs or have been furloughed in the Unites States alone, with the unemployment rate peaking at 14.7% in April. Factory utilization and industrial production have plummeted as well, victims of a U.S. economy in a self-induced shutdown.
Stock prices have been known to behave in counter-intuitive ways, with the 40% equity rebound from March lows being one further example of that. With major stock benchmarks returning to near all-time highs in recent weeks, equities around the world are responding to unprecedented Central Bank stimulus and applauding the improving economic trends. June, for example, was the second consecutive month of improving employment with 4.8 million jobs created. In addition, the U.S. consumer has been surprisingly resilient during the recession, contributing to a rebound in key data such as new home sales.
Looking ahead, the upcoming Presidential election will have significant ramifications for the market, as it will plot a course for future regulations, fiscal policy, trade, and taxation. On the COVID front, the market appears to be discounting a successful re-opening of the global economy, making the bending of the virus curve imperative. Lastly, with politics and the pandemic putting investors on edge, investors will be hoping for positive earnings guidance being delivered by company executives in July. Because corporate earnings announcements influence stock prices, it will be important for businesses to provide updates and forecasts that support this fully valued equity market.