The S&P rallied 1.5 per cent to finish the quarter up 20 per cent, its best quarter since 1998 and keeping its YTD losses at –4 per cent. The Dow Jones industrial average closed up 200pts as it continued its bounce off the 50-day simple moving average to notch its best quarter since 1987. Things were a little more mixed in Europe but again we saw the major bourses finish their best quarter in years.
Stocks rallied so sharply in Q2 for a number of reasons – chiefly stimulus, both fiscal and monetary, as well as the reopening of economies and better virus rates in most countries, though this trend has somewhat come undone in the US in the last couple of weeks. The aggressive pullback in February and March also left stocks rather oversold on a short-term basis, when considering the stimulus and relative yields to government bonds. Meanwhile hopes of a vaccine are central if we are to see 2021 look more like 2019 than this year. For gains to be sustained in Q3 stocks require the continued support of stimulus, which remains on tap, as well as a better outlook on the virus spread and for the hard economic data to show a strong bounce from Q2, both of which could be more tricky.
Boeing declined by more than 5 per cent as Norwegian Air cancelled an order for almost one hundred jets and competitor Airbus announced it would cut its workforce by 15,000, whilst Tesla shot 7 per cent higher to a new record that takes its market capitalisation to $200bn for the first time. Shares in Facebook, which has come under fire lately by showboating big brands who are pulling advertising temporarily, rallied 3 per cent. Read our analysis of the advertiser boycott at Facebook.