All blog content is for information purposes. Any reference to indivisual stocks, indexes, or other securities as well as all graphs and tables are not recommendation but only referenced for illustration purposes.

Market Commentary for the week ending May 23rd, 2020


  • Results from an early study on a COVID-19 vaccine fueled a market rally in the week that persisted
  • Small U.S. stocks surged +7.8% this week as investors embraced more risk in their portfolios
  • Economic data continues to show staggering drops in nearly all economic activity but there are signs of light


Real Estate's Changing Landscape

There are indications and speculation that the commercial real estate industry will change permanently. Real estate stocks have been the second worst performers year-to-date, just behind the steep fall in commodity prices due to the collapse of oil prices, with the average down -27.0%. The declines by property type have been uneven as illustrated in the accompanying graph.

Real Estate Stocks (REITs) by Type year-to-date Performance

Source: www.nareit.com for stocks by type; www.YCharts.com for performance

The economic shutdown and COVID-19 pandemic has likely accelerated some existing trends and started new ones. The pressure online retailers have put on brick-and-mortar stores and the properties they occupy have intensified. This is evident in the -47.5% drop in the value of REITs focused on retail properties such as mall-owner Simon Property Group (SPG) and Realty Income Corp. (O). It’s estimated that 30%-50% of retailers have stopped paying rents.

Office properties are suffering the second biggest decline as employers realize productivity is little changed with employees working from home and many employees favoring the lifestyle. Furthermore, companies will have more opportunity to recruit the best talent with fewer geographic limitations. As a result, employers are rethinking long-term plans including an announcement from social media giant Facebook (FB) saying that they expect half of their employees will be remote in 10 years from now.

On a very positive note for real estate owners has been the continued drop in interest rates and their cost of borrowing. This reduces overall costs creating some buffer for the loss of rent payments.

Interesting Numbers of the Week


Walmart hired 250,000 new employees in the quarter ending May 1. This company has been one company that has seen increased revenue during the pandemic as consumer flock to the company’s more than 11,500 stores and online portal.


A University of Chicago study shows that 68% of the recently unemployed are making more money unemployed than they were when working. This is making it hard for some companies wanting to reopen get works to come back to the job.

This Week’s Performance Highlights

Market Indexes week ending May 22, 2020

Source: www.YCharts.com

Risk on! That’s the quickest way to describe this week’s markets. Investors were encouraged by the positive results from biopharmaceutical company Moderna (MRNA) of their COVID-19 vaccine testing driving the Dow Jones Industrials higher at the start of the week by more than 900 points. Some of the poorest performing stocks during the pandemic experienced the biggest gains as a sign of investors’ willingness to take risks. The market strength early in the week generally persisted throughout the week with stocks around the world all closing higher.

  • Small U.S. stocks were the best performers by a huge margin gaining +7.8% for the week. Again, this is a sign of investors’ increased appetite and desire for risk as this group is still down -18.3% year-to-date as compared to large stocks down just -7.6% for the year.
  • Large U.S. stocks had a very good week as well gaining +3.2%. For the week, the S&P 500, Dow Jones Industrials, and NASDAQ Composite all performed within a fraction of a percent of one another but it’s a different story year-to-date with the NASDAQ higher by +3.9% while the Dow is down -14.3%.
  • Healthcare stocks were the only group lower for the week. Industrials, energy, and financials outperformed, some of the weakest sectors during the pandemic, while technology stocks gained but lagged behind.
  • International stocks were all higher with developed countries outperforming up +3.3% for the week lead by Eurozone markets such as Germany surging +6.7%. Japan’s market lagged behind but still gained +1.9%.
  • Emerging markets, on average, gained +1.1% for the week but were held back by declines in China of -1.2% and Hong Kong by -4.3% due to the political unrest between China and Hong Kong.
  • Commodities gained +4.6% as the price of oil continues to recover. Gold, an asset that tends to go higher when investors fear risk, declined by -0.4% for the week.
  • Bond prices inched higher by +0.3% pushing yields down.

Economic Indicators

Housing Starts fell -30% in April as compared to the previous month to annual rate of 891,000. This was slightly below expectations but permits, a indications of future housing starts, came in better than expected, although still down -21%, at 1.07 million. There are still signs that demand for new homes is strong and outpacing supplies as the housing market was tight going into the economic shutdown.

Existing Home Sales fell to the lowest level in a decade off -18% from the prior month to an annualized rate of 4.33 million. The declines were nationwide with the west experiencing the biggest drop. Although sales were down, prices were up in every region with an average gain of +7.6% compared to the same month last year. There are signs buyers are interested as long as sellers are willing.

Initial Jobless Claims continued to inch lower but are still at staggering levels with 2.44 million new claims in the most recent week. This headline number though understates the number of newly unemployed by approximately 1.1 million which is the number filing through the federal government’s temporary Pandemic Unemployment Assistance program. A total of approximately 8.1 million have filed through this program that has made workers in the gig economy, such as Uber drivers, eligible for the first time.

Upcoming Economic Reports

  • Home Price Index
  • Consumer Confidence Index
  • New Home Sales
  • Initial Jobless Claims
  • Durable Goods Orders
  • Consumer Spending

Contact Mark A. Patton :