DM Monthly Report – May 2020

HAVE STOCKS FALLEN FAR ENOUGH? – By the end of April, the S&P 500 had reclaimed a significant portion of its initial COVID-crisis decline, leaving some to wonder how Wall Street’s seemingly sanguine mood could have become so disconnected from what we all see happening on Main Street. A good portion of the US bellwether’s recovery, though, can be explained by its composition, rather than its constituents. The S&P is a ‘cap-weighted’ index, meaning that larger companies have greater influence on its performance and, at the moment, Microsoft, Apple, Amazon, Alphabet, & Facebook account for a 20%+ benchmark weight. These companies also happen to be faring particularly well in the new economic environment and their stocks have reflected this, with each now in positive territory for 2020. Looking at the market in a different way, the chart above plots an equal weighted version of the S&P 500 against the standard non-US global index.

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