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Market Recap: Monday, June 1

All three major indices closed in the green after Monday’s trading session, with investors looking beyond George Floyd protests, rising U.S.-China tensions and worries over the coronavirus. The Final Round panel discusses the latest.

Video Transcript

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- Welcome back to The Final Round here on Yahoo Finance. You just saw the closing bell. the first trading day of June under our belt. And looks like we saw gains across the board, albeit very small. We have the Dow up 86 points, or just over 80 points it looks like as we still shake out the exact gains of the day. The S&P also holding onto gains, up just around 4/10 of a percent. And the NASDAQ, the big winner among the major averages, up just around 7/10 of a percent.

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It's interesting what we're seeing sector-wise. 9 of the 11 sectors actually look like they closed in the green this afternoon, a pretty broad day of gains across the board. Real estate, energy, and utilities are the top performers, sector-wise. And it seems, once you take a step back, investors seem to be looking beyond the recent turmoil, the recent risk that we've been talking about in the markets.

Most recently, the protests over the weekend, over the last couple of nights, in response to the killing of George Floyd in Minneapolis and the ongoing issues of racial inequality doesn't look to be impacting the markets, at least for now. And then, of course, we also have the risks of coronavirus, a potential second wave, and the escalating tension between the US and China.

I want to bring in my co-host, Myles Udland. And Myles, we were talking about this last hour and still pertains to be true, just the fact that investors are continuing to look past the risks that we have in the market today, the protests over the last couple of days, still a fact that we are in the midst of a pandemic, and we continue to build on these gains. We continue to see this momentum that doesn't really show any signs of letting up anytime soon.

MYLES UDLAND: Well, I think Melody Hahm said it really well in our last hour, when she said the stock market's basic bet right now, what's implied by the performance of the stock market today-- and we don't have to worry too, too much about any one day's action. But in general, the bet from investors has been not just to the protests over the weekend but also to the pandemic, really, in the last six weeks, is that not much is going to change.

So yeah, we've seen some relative winners. You look at the stock of Zoom, for example. OK, so more people are doing Zoom calls because they can't go to the office. There is a relative winner. You look at the bank stocks. The economy not doing as well in the next couple of years as it had been doing, bank shares are slightly lower. But overall, the stock market has continued to perform far better than we're seeing the average American perform in their own employment journey because the stock market, in general, and investors in general, think that not a whole lot is going to change.

And now we have an election coming up in a few months. We'll see what the market prices it around that. We're still a few months away, really around August and September, when some of those November futures start coming on the board. You see more change in the way that people are positioned for the election.

So that's something to look for as we head into the summer. And I think related to that would be, again, as we discussed last hour, would there be a new political regime that would change tax policy here in the US? A lot of the issues we're discussing with respect to these protests and why we've gotten to this point is how moneys are allocated and from whom we collect taxes and in what amounts.

And so the stock market's general bet in the last several decades has been, well, taxes will be lower, and so profits will be higher. That's been a very, very profitable trade. Does that sustain over the next several years? These are the big questions that I think are facing the markets over, again, not just this year, but in the next decade.

And for right now, I think it is fair to say the market's overall bet has been, not much will change. I think we would all love the economy to go back to the way it was because the pandemic economy is not really functioning at all. Societally, I'm not really sure nothing changing is very positive, but that does seem to be the market's initial-- very initial-- preliminary response to all this.

SEANA SMITH: Yeah. And going off of the conversation we were having last week, just in regards to one of the risks out there-- Myles mentioned it, and that's the 2020 election. That hasn't even really been at the forefront of our minds over the last couple of weeks. But Goldman recently wrote a note about it, saying that it is potentially the biggest risk here going forward for the markets.

And in a new note today, Goldman was out saying that stocks, they expect stocks to end the year lower than where we're trading today. Right now, the S&P is holding above 3,000 at 3,055 it looks like it closed out today. And they expect the S&P-- they did didn't change their year-end target of 3,000. So it sounds like, at least from Goldman's perspective, that they expect investors to maybe wait on the sidelines, be a little bit apprehensive here, at least in the short term until some of these headline risks begin to subside.

- Right. And at least we will get an answer to the one big question on November 3 when we actually have the presidential election. The thinking here is that if Joe Biden wins, we know what Trump's economic agenda is-- basically, continue to do things to favor companies, which is tax cuts and deregulation. Joe Biden's economic plan involves some tax hikes, some new spending. This would, in theory, hurt corporate profits. He does want to raise the corporate profits tax, the corporate tax rate.

But you have to ask yourself, isn't there a big difference between what Joe Biden, what his economic plan was-- and this is all, by the way, before the coronavirus outbreak and the reality we have today. So to my mind, even in the most optimistic scenario for Democrats, which is Joe Biden wins and the Democrats would take the Senate, so they would control Congress, I have a hard time seeing how any tax hikes could pass anytime soon at least.

Because even by this time next year, I think we're still going to be in fairly deep economic trouble. That's what the economists are saying anyway. So I think you have to look at Joe Biden's plan on paper and then assess the reality of what might happen if he becomes president. I think they're pretty different.

SEANA SMITH: Yeah, and Brian Chung, bringing you into the conversation here, all this headline risk. I know you specifically focus on the Fed. And a lot of the questions out there, the Fed has reiterated time and time again that they will do whatever it takes to prop up the economy, that they will do whatever it takes to help shore up some of the risk that is out there. So it's interesting, as we get more and more commentary from Fed officials, it almost seems like their outlook remains pretty positive at this point. I'm just wondering, I guess, if you think that's subject to change, just given the fact that so many of these risks don't seem to be subsiding any time soon.

BRIAN CHUNG: Well, Seana, if you're saying positive from the perspective of, we might start to see at least some economic activity come back in the second half of this year, then, yes, that's definitely the case. We've heard a number of Fed presidents and Fed officials over the past few weeks say that's the case. But I think the tenor actually has changed to something a little bit more weary of what that recovery will look like.

At first you had a number of Fed presidents in the early parts of this COVID-19 crisis saying, I think that we should expect a pretty good rebound from the US economy. And now you had that change to a number of Fed presidents now saying, we actually still expect to see unemployment in the double digits by the end of this year, which would hint at something of a longer recovery and something that maybe doesn't resemble anything of a V or a quick rebound here.

So I think that Fed officials will be watched as they change their forecast. They've been saying along the way that the forecasts are really tough to do because this is an extremely unprecedented type of thing. But we have to keep in mind that next week is that FOMC meeting where, for the first time since the COVID-19 crisis, the Fed is expected to release a summary of economic projections. This is that PDF document that includes a dot-plot for where they see rates going in the medium term. And a lot of Fed officials have said, look, we're going to publish this next week. It's going to come. But you should be very careful about how you interpret it because economic forecasts right now is just extremely difficult. But when we do get that release next week, it will really be our first guide, if we have any, over where the Fed might see policy going in the future, albeit subject to heavy change.

SEANA SMITH: And there's so much uncertainty out there. We are seeing so many companies or we saw so many companies pull their guidance. Now we have Fed officials and other economists saying that the uncertainty or their outlook here can't really be trusted because we don't know where we're headed with the coronavirus. Obviously, that is getting investors' attention.