Guggenheim: Equity Market Views: May 2020
Guggenheim recently released its May 2020 Equity Market Views. Topics include:
Looking Back – Q1 Review
After plunging due to uncertainty surrounding the COVID-19 pandemic, markets appear to have found a bottom on March 23, and have since rallied sharply off the lows. Does this mean that the worst is behind, and the bottom is in? While we will only know the answer to that question through the benefit of hindsight, the takeaway from the recent gains is that the market is beginning to look beyond the “here and now” and is starting to discount what the environment may look like 6–12 months into the future.
Bottoms Tend to be a Process
While markets are forward-looking vehicles and often bottom several months ahead of exiting recessionary periods, bottoms also tend to be more of a process versus a pivot. In the weeks ahead, uncertainty surrounding the economic impact associated with the coronavirus will remain elevated and we will get constant reminders of the economic damage as the March/ April data gets reported. When all is said and done, the market bottom will probably look more like a “W” or some sort of saw-toothed pattern versus a V-shape.
Two sectors that should be considered now, and in a recovery, are Information Technology and Health Care. Information technology, specifically software, which tends to have significantly less volatility than its technology counterpart, and semiconductors, due to less dramatic inventory cycles. From an absolute basis, software provides efficiencies and greater capture of current business in a low growth economy. As a more defensive sector, health care is significantly less impacted by the coronavirus than the S&P 500® Index, as a whole.
For more information regarding Guggenheim’s May 2020 Equity Market Review and to read the full paper including UIT Investment Implications, please click on the link below:
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