Equity market behavior year-to-date can be described as a tale of two quarters. The Standard and Poor’s (S&P) 500 declined 19.6% in the first quarter of 2020, while in the second quarter it posted a 20.5% gain. The index still sits in negative territory, but investors are no doubt in a better frame of mind currently than a few short months ago.
We imagine some of the optimism catalyzing a significant portion of the reversal stems from the sequential improvement and strengthening of economic data. This, along with certain policy actions have lifted the stock market off its March 23 low, as perceptions that the worst of the COVID-linked downturn is behind us, restoring elements of confidence.