The second quarter of 2020 posted the best quarterly performance for stocks since 1998, with major benchmark indexes making sizeable gains over their historically poor first-quarter tallies. Much of the second-quarter growth in the stock market and economy was a bounce back from a dismal March and April when pandemic-related lockdowns and restrictions virtually shut down the economy. Nevertheless, stocks rose as investors focused on favorable economic data and the possibility of further government stimulus, despite rising virus cases and tepid trade relations with China.

The quarter’s performance highlighted a persistent theme that started when the coronavirus pandemic captured headlines: The stock market has continued to rise despite reports of a crumbling economy and slumping corporate earnings. During the second quarter, the median estimate for the large-cap S&P 500 companies’ earnings per share declined by 37% while the index gained nearly 20% in price, according to data from FactSet.

This points to a market environment that is relying on the government to maintain elevated prices. How long can that last? Many believe this unusual reality will continue for as long as fiscal and monetary policy continue to support prices. Investors are counting on Congress to pass a new $1 trillion-plus coronavirus relief bill in the third quarter, and most seem confident the Federal Reserve will continue to supply markets with liquidity through its unlimited quantitative easing and corporate bond-buying programs should stock prices fall.

The rally in global fixed income, which began at the end of the first quarter, continued through the end of June. The second quarter saw sharp price appreciation across most asset classes with Islamic financial securities being no exception. Sukuk profit rates continued to tighten. This has been driven by a coordinated global effort. Monetary authorities on every continent continue to intervene by flooding the market with liquidity, while their corresponding governments are launching repeated fiscal stimulus packages to soften the effects of the first quarter stand-still.

We anticipate that market volatility is likely to remain elevated in the U.S. and beyond until we have greater clarity on the COVID-19 pandemic and the potential impact on economic growth. We continue to favor the importance of maintaining a longer-term view, as short-term, reactive decisions can impair a prudently designed investment plan anchored to long-term goals, time horizon, and risk tolerance.

Thank you for your continued trust and investment.