- Stocks, measured by the S&P 500, ended the month of May off just 5.8% for the year after rallying 36% from the late March low. In May the Dow Jones Industrial Average gained 6.2%, the S&P 500 was up 6.5%, and the Nasdaq Composite gained 9.1%. International equity markets were also higher. The MSCI Europe Australia Far East Index (EAFE) gained 5.8% and the MSCI Emerging Markets Index was up 1.7%. Strong performance in the technology sector and unprecedented monetary stimulus fueled the outperformance.
- With the recent rally in stocks combined with a weaker corporate earnings outlook, the S&P 500 trades at 22 times its expected earnings over the next 12 months. This is the highest valuation since June 2001. Consensus earnings estimates this year have ranged from over 10% growth at the start of 2020 to the current consensus of down 20%. Earnings visibility is understandably cloudy in this environment.
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