The strongest 50-day rally in the S&P 500 Index in over 70 years has sent a signal that the economic recovery is gaining steam and may look more like a “V” than a “U,” a square root, checkmark, or swoosh. We assess the probabilities of these various scenarios for recovery and reiterate our 2020 economic growth forecasts.

As Goes the Virus, So Goes the Economy

The US economy almost certainly entered a recession in March 2020 as a result of the lockdowns and business closures to contain the COVID-19 pandemic. After gross domestic product (GDP) contracted by 5% during first quarter 2020 on an annuali

Index Performance – Week ending 6/5/2020

S&P 500 Index:  4.9%

Dow Jones Industrial Average:  6.8%

Nasdaq Composite:  3.4%

Equities

The S&P 500 Index, Dow Jones Industrial Average, and Nasdaq were all higher, with the best performer being the Dow, while the Nasdaq lagged. Given the divergence between the Dow and Nasdaq, value/cyclical stocks continue to be the headliner, outperforming growth and the technology sector by 5%, an even wider margin compared with last week. Energy, financial, and industrial stocks benefitted, posting double-digit returns this week. Healthcare lagged, up

It appears optimistic stock investors have for the moment won out versus more dour economic forecasters.

The US Bureau of Labor Statistics released its monthly employment report this morning, revealing that the domestic economy gained 2.5 million jobs in May, surpassing economists’ predictions for a 7.5 million loss. This comes on the heels of April’s report, which posted the largest contraction in the history of the data series since its inception in 1939. As seen in the LPL Chart of the Day, the unemployment rate fell to 13.3%, while average hourly earnings fell 1% month over month, the result of lower-wage workers

In many ways, what we’ve seen so far in 2020 has been both record-breaking and devastating. From the S&P 500 Index peak on February 19 to the bear market lows March 23, stocks lost 33.9%. Now, 50 trading days later, stocks have gained 39.6%, for the largest 50-day rally since the S&P 500 moved to 500 stocks in 1957.

“There are no rollercoasters that can replicate what stocks have done so far in 2020,” exclaimed LPL Financial Senior Market Strategist Ryan Detrick. “Here’s the catch though: Big 50-day rallies in the past have taken place near the start of new bull markets, and the returns going