Volatility returned this week as the U.S. economy gradually reopened but fears of a second wave of infections weighed on the markets.

Stocks continued to rise on Monday following Friday’s strong May jobs reports.  Questions still lingered as to why May added so many jobs given the weekly unemployment claims.  One explanation was that the claims numbers may have been too high as laid off workers, struggling with antiquated online state unemployment systems, have filed more than once.

On Wednesday The Federal Reserve met and indicated they have no intention of raising interest rates before the end of 2022 and are studying ways on how to provide more support to the economy.  Overall, this struck a more pessimistic tone than expected and contributed to a selloff.  Also, the Organization for Economic Cooperation and Development released their forecast on Wednesday and forecast that global economic activity would shrink by 6% for 2020.  This was twice as large of a drop as forecast by the International Monetary Fund in April.  Furthermore, the OECD forecast that if there is a second wave of infections the global economy would shrink by 7.6% this year.  Oil and energy stocks had rallied sharply from the April lows on reopening hopes and the OPEC+ agreement to extend the coronavirus cuts for another month through the end of July.  On Wednesday oils resurgence was killed by a huge surge in U.S. inventories of both crude oil and gasoline.  Also on Wednesday, were comments from Anthony Fauci expressing concerns about the protests causing a resurgence in the virus. 

On Thursday, the city of Huston backtracked on reopening and closed restaurants after hitting their highest increase in new cases on Wednesday.  This added to the selloff frenzy on Thursday with the biggest drop since March. 

Friday saw a significant bounce in equities.  However, for the week stocks ended substantially lower.

Treasury yields fell sharply as the 30-year bond fell to 1.463% but the 10-Year note fell to 0.71%.  Crude oil fell to $36.42 and natural gas fell to $1.74 per MMBTUs.  The U.S. dollar ended the week higher against a basket of currencies and gold prices rose to $1738.80 an ounce.

In the economic numbers this week:

• China reported
  • Exports in May were down 3.3% from a year earlier while imports fell 16.7% causing the trade surplus to surge.  The biggest change was a large increase in Medical exports.
  • Factory gate prices fell 3.7% in May from a year earlier.
  • Consumer prices rose 2.4% in May from a year earlier.
• The Labor Department reported:
  • 1.5MM workers filed initial unemployment claims last week down from 1.9MM the week before. 
  • Continuing claims fell slightly from a downwardly revised 21.3MM to 20.9MM as some return back to work.
  • Consumer prices fell 0.1% in May.  This follows declines of 0.8% in April and 0.4% in March.  Excluding volatile food and energy prices also, fell 0.1% in March.
• The EIA weekly oil report is here wpsrsummary.  Also, the EIA reported in the past week:
  • Field production of crude oil dropped from 11.2MM barrels to 11.1MM barrels per day.  The peak production at the end of February was 13.1MM barrels per day.
  • Natural gas storage rose by 93BN cubic feet and is above the five year average at this time of year.
• Baker Hughes reported the number of active oil rigs fell 7 to 199 and the number of active natural gas rose 2 to 78.

Please call us if you have any questions.

Best Regards,

Loren C. Rex, CFP^®, AIF^®, MA                                                   Erik A Smith AIF^®

President                                                                                        Managing Partner

Generations Financial Planning & Wealth Management    269-441-4143

77 E. Michigan Ave, Suite 140

Battle Creek, MI  49017

Tel 269-441-4090

Carrie Fuce, Assistant 269-441-4091

Toll Free: 800-513-8180

Fax 866-381-2301

Visit our Website:  www.genfinplan.com

Registered Representative of and securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC.  Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor.  Cambridge and Generations Financial Planning & Wealth Management are separate companies and are not affiliated. 

These are the opinions of Loren Rex and Erik Smith and are not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice.  The Indices mentioned are unmanaged and cannot be invested into directly.

The information in this email is confidential and is intended solely for the addressee.  If you are not the intended addressee and have received this email in error, please reply to the sender to inform them of this fact.  We cannot accept trade orders through email. Important letters, email, or fax messages should be confirmed by calling 269-441-4091. This email service may not be monitored every day, or after normal business hours.