Todd’s Take on the Market
I know we are concerned about the state of the markets and society right now and it is warranted. I am not here to sugarcoat the facts, but here they are.
Stocks rallied once again last week as the Dow rose 3.85%, the S&P 500 rose 3.04% and the tech-heavy NASDAQ rose only 1.79%. The Dow is now only down 10.06% for the year, the S&P 500, down 4.97%, the NASDAQ is actually up 6.22%, but small caps (Russell 2000) is down 15.95%—year to date.
The shift from those that were cautious and even looking for a retest of the March lows has been the quickest I can ever remember. One trader asked me last weekend, “If we get past Covid-19, what is the likelihood that the market makes new all-time highs?”
My answer, “Even if we don’t get past Covid-19, the market might make new all-time highs.”
The stock rally accelerated in April and May amid reopening optimism even as the economy slammed on the brakes. June could help clarify whether the market anticipated things right or got a bit ahead of itself.
The markets are assuming/anticipating a LOT of good news right now, but the facts are:
- Depression level unemployment
- 100k+ Americans cited dead for the coronavirus
- Restaurants shuttered for the past 3 months and only partially opened now
- Travel halted
- Trade war escalating
- Hong Kong has fallen…to the hands of China, and Trump isn’t happy
- Worst housing numbers ever
- Riots, looting and vandalism across the country
- U.S. and China at odds over Hong Kong, trade and the South China Sea
- President Trump ordered the White House to go dark and everyone into bunkers
You would think this would be enough to send stocks plummeting; but no, all-time market highs are inbound.
Just look at unemployment: The aggregate unemployment claims since the start of the crisis stand at 40,767,000 and appear to be cresting. This is an incredible number, of course, 31.8% of all non-farm jobs in America—highest ever in records. Yet the removal of some from continuing claims is welcome news—we are all looking for a silver lining.
I know this sounds like fire and brimstone, but the markets are giving it all a “free pass”. That’s why we remain cautiously optimistic and invested despite all of the bad news.
This week, we will get the new jobs report and the markets aren’t expecting any great news, but once again, traders, not investors, may look past this number and think that greener pastures are ahead. I will be monitoring these markets and any latest developments. So, stay tuned and I will keep you posted.
Todd Day, MBA
Portfolio Manager
Horizon Financial Services, LLC
