Welcome spring. Few things in life are as reliable as the seasons changing. Although no one can consistently predict the day or even the week the seasons will change weather-wise, we intuitively know change will happen. As Midwesterners, we know that warm weather can occur before spring’s grand opening, and yet, we can’t rule out a snow until almost June. In terms of weather, no single day represents a meteorological change of season. One parallel between seasons and financial markets is they both go through cycles and the transitions can take time.

Market Notes:

• This past week the stock prices of small companies outpaced large after lagging during the February-March decline

  • Important to note, a single observation does not make a trend

  • Historically, when coming out of a market decline, smaller companies have tended to outperform their larger counterparts

• Corporate earnings for the first quarter have generally been lower than prior quarters – no surprise

• 55% of companies within the S&P 500 Index have now reported earnings for the first quarter (1)

• Thus far, weighted average net income decreased 13% compared to first quarter 2019

• Against this backdrop, stock markets have been trending higher throughout this earnings season

  • During Q1, the US economy, measured by gross domestic product (GDP), shrank by 4.8% on an annual rate

  • This decline was the first in six years and the largest since fourth quarter of 2008

• The Federal Reserve met this week, as expected short term interest rates were unchanged with a target rate range of 0-0.25%

  • Low-interest rates can be used as a form of economic stimulus

We hope you find opportunities to enjoy and celebrate spring.

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V20123643. Source 1: Factset, Inc. 05/01/2020.