In 1976, Grateful Dead released “What a Long Strange Trip It’s Been.” The second quarter felt like a long strange trip, except it took place over just three months. We entered the quarter trying to flatten the curve, did so, and saw the economy reopen and social distancing restrictions relaxed to a degree. The market rallied, employment started to come back, the rate of new virus cases increased, and stocks sold off a bit as hopes for a quick eradication of Covid-19 faded. At the same time, the horrific killing of George Floyd in Minneapolis on Memorial Day and the resulting wave of protests and violence further shattered the spirit of the nation.

While the virus and racial tension have been a double-punch to the country, stock prices for the most part have kept on “Truckin’.” After bouncing strongly late in the first quarter, they continued their ascent in Q2, shaking off several small sell-offs and a larger one in June to close the quarter up 20%. The Nasdaq rose more than 30%, hitting 10,000 for the first time. The market was buoyed not only by the leveling off in new virus cases but also the progress on managing those cases. Hospitals are learning what treatment strategies are effective and when to use them, and the death rate has consequently fallen. Covid-19 remains deadly for the elderly but far less risky than even the flu for children. Of course, children can pass it to their elders. These facts, along with the dramatic impact on the economy that the protective measures have had, have created intense disagreement among various groups about how to handle the crisis.

Stock prices have largely been driven on a daily basis by the virus statistics, as investors know that a full economic rebound is dependent on a full reopening. In June, the number of new cases in the US leveled off at about 20,000 per day. But by the end of that month, they had hit almost 50,000 per day. One may have expected this to lead to a significant decline in stocks, and there was some volatility in June, but with deaths not having spiked (granted, there tends to be a lag between new cases and deaths), perhaps the market is starting to view this as a manageable problem. Time will tell whether this is appropriate or not.

The employment data improved during the quarter. The number of jobs increased by 2.7 million in May and another 4.8 million in June, though the total remains 15 million below the February level. The unemployment rate fell to 11.1%, which is still very high.