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A Rally for the Ages

The US stock market finished June higher, adding incremental gains on what was already shaping up as a historic quarter. Equities closed the month within striking distance of flat year-to-date, and they have recovered much of their losses from the mid-March low.

Our Perspective

Markets have run so far so fast that many areas of the market are becoming expensive again. Sentiment appears to have turned upward, and retail investors are making headlines as they pour money into speculative stocks.

There remains a tremendous amount of uncertainty in economic fundamentals. That uncertainty, along with an enormous stock market surge, make an active investment approach as important as ever.

Finding Opportunity in Energy

Natural gas prices were volatile even before the pandemic, and today’s continued low prices have made it exceedingly difficult for producers. Many producers are not breaking even, and the industry is slashing future investment in additional production.

Our Perspective

Lower prices may be hurting natural gas producers in the short-term, but they create opportunity for investment. Demand for this commodity isn’t going away, and the impressive supply response will create room for improved profitability in the near future.

For more, see our recent blog post, Natural Gas: Weathering the Storm.

A New Kind of Check-Up

By necessity, the pandemic has increased usage of telehealth and virtual care, which had poor adoption rates in the past. As more people try telehealth, both doctors and patients are enjoying the benefits of switching to virtual care, and the limited drawbacks have made it an easy transition.

Our Perspective

With the pandemic changing the way we live and work, telehealth companies may reap the benefit of permanent behavioral changes. Recent legislative changes, the potential for recurring revenue, and Medicare buy-in make this an industry to watch.

For more, see our recent blog post, Telehealth is Finally on the Rise.

Shutting Down the Mall

Retailer bankruptcies and store closures have unsurprisingly risen as a result of the pandemic and our society’s social distancing response. Too much physical space, continued growth in digital, and the rise of niche sellers has further accelerated the downfall of the traditional retail industry.

Our Perspective

Even with all the turmoil, there’s still opportunity in this space. Business that are either large enough to compete at scale, or differentiated enough from mass market competitors are likely to be the ultimate winners from this change.

For more, see our recent blog post, Retail Dominoes Start to Fall.

Our View
Economic Cycle		Global economic growth reached deeply recessionary levels last quarter, but we believe the worst is behind as major global economies around the world open back up; economic growth is likely to settle into a trend below pre-crisis levels
Stock Market		An abundance of global liquidity and rising investor sentiment has led to a historically strong rebound in equities; valuations are again looking elevated, particularly against the wide range of risks within the market
Bond Market		Negative and ultra-low interest rates across the globe will remain a major challenge for long-term fixed income returns; credit spreads have tightened from peak levels, but still offer decent value
Foreign Exchange		While we believe the dollar may weaken longer term, with policymakers in nearly every major economy in the world engaged in substantial fiscal and monetary stimulus, it is difficult to make the argument that this will swing currencies significantly
Important Issues on the Radar		Coronavirus: focus has shifted to the pace of the economic recovery. Unemployment may prove stickier than policymakers may expect, and could lead to a more forceful fiscal response Trade Tensions: relations have been in decline for some time, and rhetoric is likely to become more hostile with both US Presidential candidates looking to take a hard stance on China Eurozone Integration: the potential for stronger fiscal integration in the EU could be a significant positive for the currency bloc, although it is likely to be a long and noisy process to get there Inflation vs Deflation: the significant demand shock makes it hard to call for inflation, but the sheer size of fiscal and monetary programs around the world should be a cause for concern

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The US stock market mentioned within is represented by the S&P 500 which is an unmanaged, capitalization-weighted measure comprised of 500 leading U.S. companies to gauge U.S. large cap equities. The Index returns do notreflect any fees or expenses. Dividends are accounted for on a monthly basis. Index returns provided by Bloomberg. S&P Dow Jones Indices LLC, a division of S&P Global Inc., is the publisher of various index based data products and services, certain of which have been licensed for use to Manning & Napier. All such content Copyright © 2020 by S&P Dow Jones Indices LLC and/or its affiliates. All rights reserved. Data provided is not a representation or warranty, express or implied, as to the ability of any index to accurately represent the asset class or market sector that it purports to represent and none of these parties shall have any liability for any errors, omissions, or interruptions of any index or the data included therein.

All investments contain risk and may lose value. This material contains the opinions of Manning & Napier, which are subject to change based on evolving market and economic conditions. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

This newsletter may contain factual business information concerning Manning & Napier, Inc. and is not intended for the use of investors or potential investors in Manning & Napier, Inc. It is not an offer to sell securities and it is not soliciting an offer to buy any securities of Manning & Napier, Inc.