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Stock Market in May: What Happened and Why?

By Matthew Frankel, CFP® – May 31, 2020 at 6:33AM

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Here's a recap of the market's performance over the past month, and the reasons for it.

The stock market had a rather strong month in May, with the S&P 500 rising by more than 6% on the heels of a very strong 18% rally in April.

While the path higher hasn't been a straight one, and the volatility we've seen throughout the COVID-19 pandemic hasn't gone away, it's fair to say that investors seem far more optimistic than they did a couple of months ago.

Two businessmen looking at financial chart on a computer screen.

Image source: Getty Images.

The stock market's performance in May

Before we get into the major news of the month, here's a look at how the major stock indices performed:


May 2020 Performance

Year-to-Date Change

S&P 500



Dow Jones Industrial Average



Nasdaq Composite



Russell 2000



Data source: yCharts. Returns as of 5/29/2020 at approximately 2pm EDT. Parenthesis indicate negative numbers.

A couple of interesting notes. First -- that isn't a typo. The Nasdaq is actually up in 2020. Many of the largest stocks in the Nasdaq have been largely unaffected by the pandemic, while others actually benefit from people staying at home and shopping online (like

Second, notice that the Russell 2000 was the outperformer of the month, but the small-cap index has also been the hardest hit. Even after the 11% gain in May, it's still significantly underperforming all three of the other indices.

A vaccine could be here by the end of 2020

The biggest market-moving news of the month came on the coronavirus vaccine front. On May 18, Moderna (MRNA 2.32%) reported interim phase 1 data from human trials of its vaccine candidate, and the results were encouraging.

The trial gave different size doses of the vaccine candidate to 45 healthy adults, and all 45 developed antibodies to the virus. However, data on neutralizing antibodies (the important kind) was only available on eight patients. This is far from conclusive data that the vaccine works, but it's definitely a big step in the right direction. 

A few days later, Novavax (NVAX 2.20%) announced that it was beginning human trials of its vaccine candidate. There are now at least 10 vaccine candidates in human trials and more than 100 in the pre-trial research phase around the world. 

In a nutshell, this news gives investors hope that a vaccine could be available for widespread use in late 2020 or early 2021, which is what experts say would need to happen for the economy to truly get back to normal.

State economies are reopening and infections aren't spiking

Another major theme in May was state economies starting to reopen. At the beginning of May, very few states were even in the first stages of reopening, but by the end of the month, all 50 states had begun to reopen. Some are further along than others, but this is certainly good news.

What's more, while we're seeing an uptick in COVID-19 cases in some of the earlier states to reopen, there aren't any major spikes. For example, Georgia was the first to open major parts of its economy, such as in-restaurant dining, salons, and other close-contact businesses, which were allowed to open in late April. The number of average new cases per day rose to about 614 during the last two weeks of May from 595 in the first two weeks of the month, but this is a relatively small uptick compared to what many experts have feared.

On a national level, COVID-19 cases continue to fall. The five-day moving average of new cases has steadily declined from about 34,000 per day in early April to about 22,000 at the end of May, according to Johns Hopkins.

Consumer data has been strong

As a final point, we're starting to get some positive data that indicates the worst of the economic impact could be over. Just to name a few:

  • Consumer spending seems to be on the rise. As one example, Mastercard (MA 2.16%) released an update on May 13 which indicated that U.S. switched transaction volume for the week ending May 7 was down just 6% from the same week in 2019. For the week ending April 14, the decline had been 26%, so this is big.
  • The consumer confidence index for May came in far better than expected -- 86.6 versus 82.3. And, this represents an increase from the 85.7 reading in April. Without getting to deep into what these numbers mean, the takeaway is that this shows consumers are significantly more optimistic about the economy than expected and could be more willing to spend money and boost economic activity.
  • Travel demand is coming back slowly but surely. While the roughly 322,000 passengers the TSA reported screening on May 28 is just 13% of the travel volume from the same day in 2019, it is nearly double the 171,563 passengers who passed through TSA checkpoints on May 1. 

The overall takeaway

To sum it up, May has been a rather hopeful month for investors. The economy is reopening faster than many had expected, and without massive spikes in COVID-19 cases. The early news from vaccine development efforts looks very promising. And data shows that not only is the economy starting to come back, but consumers might be more ready to get out and spend than experts had thought. In a nutshell, the good news in May clearly outweighed the bad, and that's why the stock market continued its rebound.

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Stocks Mentioned

Mastercard Incorporated Stock Quote
Mastercard Incorporated
$290.48 (2.16%) $6.14
Novavax, Inc. Stock Quote
Novavax, Inc.
$18.60 (2.20%) $0.40
Moderna, Inc. Stock Quote
Moderna, Inc.
$120.99 (2.32%) $2.74

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